Community Reinvestment Act Regulations

 
CONTENT
Federal Register, Volume 85 Issue 6 (Thursday, January 9, 2020)
[Federal Register Volume 85, Number 6 (Thursday, January 9, 2020)]
[Proposed Rules]
[Pages 1204-1265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27940]
[[Page 1203]]
Vol. 85
Thursday,
No. 6
January 9, 2020
Part II
Department of the Treasury
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Office of the Comptroller of the Currency
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12 CFR Parts 25 and 195
Federal Deposit Insurance Corporation
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12 CFR Part 345
Community Reinvestment Act Regulations; Proposed Rule
Federal Register / Vol. 85 , No. 6 / Thursday, January 9, 2020 /
Proposed Rules
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 25 and 195
[Docket ID OCC-2018-0008]
RIN 1557-AE34
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 345
RIN 3064-AF22
Community Reinvestment Act Regulations
AGENCY: Office of the Comptroller of the Currency, Treasury and Federal
Deposit Insurance Corporation.
ACTION: Joint notice of proposed rulemaking; request for comment.
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SUMMARY: Office of the Comptroller of the Currency (OCC) and the
Federal Deposit Insurance Corporation (FDIC) propose regulations that
could encourage banks to provide billions more each year in Community
Reinvestment Act-qualified lending, investment, and services by
modernizing the Community Reinvestment Act (CRA) regulations to better
achieve the law's underlying statutory purpose of encouraging banks to
serve their communities by making the regulatory framework more
objective, transparent, consistent, and easy to understand. To
accomplish these goals, this proposed rule would strengthen the CRA
regulations by clarifying which activities qualify for CRA credit,
updating where activities count for CRA credit, creating a more
transparent and objective method for measuring CRA performance, and
providing for more transparent, consistent, and timely CRA-related data
collection, recordkeeping, and reporting.
DATES: Comments must be received on or before March 9, 2020.
ADDRESSES: Comments should be directed to:
    OCC: Commenters are encouraged to submit comments through the
Federal eRulemaking Portal or email, if possible. Please use the title
``Community Reinvestment Act Regulations'' to facilitate the
organization and distribution of the comments. You may submit comments
by any of the following methods:
     Federal eRulemaking Portal--Regulations.gov Classic or
Regulations.gov Beta:
    Regulations.gov Classic: Go to https://www.regulations.gov/. Enter
``Docket ID OCC-2018-0008'' in the Search Box and click ``Search.''
Click on ``Comment Now'' to submit public comments. For help with
submitting effective comments please click on ``View Commenter's
Checklist.'' Click on the ``Help'' tab on the Regulations.gov home page
to get information on using Regulations.gov, including instructions for
submitting public comments.
    Regulations.gov Beta: Go to https://beta.regulations.gov/ or click
``Visit New Regulations.gov Site'' from the Regulations.gov Classic
homepage. Enter ``Docket ID OCC-2018-0008'' in the Search Box and click
``Search.'' Public comments can be submitted via the ``Comment'' box
below the displayed document information or by clicking on the document
title and then clicking the ``Comment'' box on the top-left side of the
screen. For help with submitting effective comments please click on
``Commenter's Checklist.'' For assistance with the Regulations.gov Beta
site, please call (877) 378-5457 (toll free) or (703) 454-9859 Monday-
Friday, 9 a.m.-5 p.m. ET or email [email protected].
     Email: [email protected].
     Mail: Chief Counsel's Office, Attention: Comment
Processing, Office of the Comptroller of the Currency, 400 7th Street
SW, Suite 3E-218, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2018-0008'' in your comment. In general, the OCC will
enter all comments received into the docket and publish the comments on
the Regulations.gov website without change, including any business or
personal information provided such as name and address information,
email addresses, or phone numbers. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to
this rulemaking action by any of the following methods:
     Viewing Comments Electronically--Regulations.gov Classic
or Regulations.gov Beta:
    Regulations.gov Classic: Go to https://www.regulations.gov/. Enter
``Docket ID OCC-2018-0008'' in the Search box and click ``Search.''
Click on ``Open Docket Folder'' on the right side of the screen.
Comments and supporting materials can be viewed and filtered by
clicking on ``View all documents and comments in this docket'' and then
using the filtering tools on the left side of the screen. Click on the
``Help'' tab on the Regulations.gov home page to get information on
using Regulations.gov. The docket may be viewed after the close of the
comment period in the same manner as during the comment period.
    Regulations.gov Beta: Go to https://beta.regulations.gov/ or click
``Visit New Regulations.gov Site'' from the Regulations.gov Classic
homepage. Enter ``Docket ID OCC-2018-0008'' in the Search Box and click
``Search.'' Click on the ``Comments'' tab. Comments can be viewed and
filtered by clicking on the ``Sort By'' drop-down on the right side of
the screen or the ``Refine Results'' options on the left side of the
screen. Supporting materials can be viewed by clicking on the
``Documents'' tab and filtered by clicking on the ``Sort By'' drop-down
on the right side of the screen or the ``Refine Results'' options on
the left side of the screen.'' For assistance with the Regulations.gov
Beta site, please call (877) 378-5457 (toll free) or (703) 454-9859
Monday-Friday, 9 a.m.-5 p.m. ET or email
[email protected]. The docket may be viewed after the
close of the comment period in the same manner as during the comment
period.
     Viewing Comments Personally: You may personally inspect
comments at the OCC, 400 7th Street SW, Washington, DC 20219. For
security reasons, the OCC requires that visitors make an appointment to
inspect comments. You may do so by calling (202) 649-6700 or, for
persons who are deaf or hearing impaired, TTY, (202) 649-5597. Upon
arrival, visitors will be required to present valid government-issued
photo identification and submit to security screening in order to
inspect comments.
    FDIC: You may submit comments, identified by RIN 3064-AF22, by any
of the following methods:
     Agency Website: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on
the Agency website.
     Email: [email protected]. Include the RIN 3064-AF22 on the
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
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     Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7:00 a.m. and 5:00 p.m.
    Instructions: All comments received must include the agency name
and RIN 3064-AF22 for this rulemaking. All comments received will be
posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided. Paper copies
of public comments may be ordered from the FDIC Public Information
Center, 3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226 by
telephone at (877) 275-3342 or (703) 562-2200.
FOR FURTHER INFORMATION CONTACT:
    OCC: Vonda Eanes, Director for CRA and Fair Lending Policy, Bobbie
K. Kennedy, Technical Expert for CRA and Fair Lending, or Karen
Bellesi, Director for Community Development, Bank Supervision Policy,
(202) 649-5470; or Allison Hester-Haddad, Counsel, Emily R. Boyes,
Counsel, or Elizabeth Small, Senior Attorney, Chief Counsel's Office,
(202) 649-5490, Office of the Comptroller of the Currency, 400 7th
Street SW, Washington, DC 20219. For persons who are deaf or hearing
impaired, TTY users may contact (202) 649-5597.
    FDIC: Patience R. Singleton, Senior Policy Analyst, Supervisory
Policy Branch, Division of Depositor and Consumer Protection, (202)
898-6859; Cassandra Duhaney, Senior Policy Analyst, Supervisory Policy
Branch, Division of Depositor and Consumer Protection, (202) 898-6804;
Pamela Freeman, Senior Examination Specialist, Examination Branch,
Division of Depositor and Consumer Protection, (202) 898-3656; Jessica
Thurman, Examination Specialist, Examination Branch, Division of
Depositor and Consumer Protection, (202) 898-3578; Richard M. Schwartz,
Counsel, Legal Division, (202) 898-7424; or Sherry Ann Betancourt,
Counsel, Legal Division, (202) 898-6560, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Introduction
    The Community Reinvestment Act of 1977 (CRA) encourages insured
depository institutions \1\ (banks) \2\ to help meet the credit needs
of the local communities in which they are chartered, consistent with
banks' safe and sound operations, by requiring federal banking
regulatory agencies to examine banks' records of meeting the credit
needs of their entire community, including low- and moderate-income
(LMI) neighborhoods.\3\ The CRA was one of several laws enacted in the
1960s and 1970s to address fairness and access to housing and credit.
During this period, Congress passed the Fair Housing Act in 1968,\4\ to
prohibit discrimination in renting or buying a home,\5\ and the Equal
Credit Opportunity Act in 1974 \6\ (amended in 1976), to prohibit
creditors from discriminating against an applicant on the basis of
race, color, religion, national origin, sex, marital status, or age.
These fair lending laws provide the legal basis for prohibiting
discriminatory lending practices, such as redlining.\7\
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    \1\ 12 U.S.C. 1813(c)(2).
    \2\ As used throughout this notice, the term ``bank'' or
``banks'' also includes uninsured Federal branches that result from
an acquisition described in section 5(a)(8) of the International
Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
    \3\ Community Reinvestment Act of 1977, Public Law 95-128, 91
Stat. 1147 (1977), codified at 12 U.S.C. 2901 et seq.
    \4\ 42 U.S.C. 3601 et seq.
    \5\ 42 U.S.C. 3604-3606.
    \6\ 15 U.S.C. 1691 et seq.
    \7\ Interagency Fair Lending Examination Procedures, p. iv (Aug.
2009), available at https://www.ffiec.gov/pdf/fairlend.pdf.
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    Congress enacted the CRA with the purpose of encouraging sound
lending to all areas of a bank's community. Specifically, in passing
the CRA, Congress found that (1) banks are required by law to
demonstrate that their deposit facilities serve the convenience and
needs of the communities in which they are chartered to do business;
(2) the convenience and needs of communities include the need for
credit services as well as deposit services; and (3) banks have a
continuing and affirmative obligation to help meet the credit needs of
the local communities in which they are chartered.\8\
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    \8\ 12 U.S.C. 2901(a).
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    The Office of the Comptroller of the Currency (OCC) and Federal
Deposit Insurance Corporation (FDIC) (together, the agencies) \9\ as
well as the Board of Governors of the Federal Reserve System (Board)
previously issued regulations to implement the statute.\10\ Since then,
the agencies and the Board have issued, revised, and sought to clarify
the CRA regulations several times. The last major revisions to the
regulations were made in 1995.\11\
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    \9\ The OCC is the primary regulator for national banks and
federal savings associations. The FDIC is the primary Federal
regulator for state-chartered non-member banks and savings
associations.
    \10\ 12 CFR parts 25, 195, 228, and 345. The Office of Thrift
Supervision and its predecessor agencies were also charged with
implementing the CRA. Its powers and duties with respect to CRA were
transferred to the OCC in Title III of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat.
1376, 1520 (2010).
    \11\ The agencies and the Board made additional substantive
changes in 2005; however, those changes were not as transformative
as the 1995 revisions.
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    During the past 25 years, technology and the expansion of
interstate banking have transformed the financial services industry,
how banks deliver their services, and how customers choose to bank.
These changes affect banks of all sizes and are most evident in banks
that have a limited physical presence or rely heavily on technology to
deliver their products and services. As banking has evolved, banks'
communities have evolved beyond those that are solely identifiable by
the delineated areas surrounding banks' physical locations.
    At the same time, communities' needs for community development (CD)
lending and investment have evolved, and the agencies have gained a
greater understanding of those needs, such as the need for CD
investments and loans with maturities longer than the typical CRA
evaluation period and the need for equity and capital in addition to
credit. The current CRA regulatory framework has not kept pace with the
transformation of banking and has had the unintended consequence of
incentivizing banks to limit some of their CD loans and investments to
shorter terms than otherwise may be best to meet the needs of their
communities.
    Over the last decade, stakeholders have called for comprehensive
changes to the CRA regulatory framework to ensure that the CRA remains
a relevant and powerful tool for encouraging banks to serve the needs
of their entire communities, including LMI neighborhoods. In 2014, the
agencies and the Board conducted a decennial review of their
regulations, with input from the public, to identify outdated,
unnecessary, or unduly burdensome regulations and consider how to
reduce regulatory burden on insured depository institutions--while, at
the same time, ensuring the safety and soundness of these institutions
and of the financial system.\12\ In 2017, the agencies and the Board
issued a report to Congress that included a summary of the public
comments and recommendations to improve the CRA regulatory framework
gathered during the three-year review process. Among the most
frequently raised issues were (1) the assessment
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area definition; (2) incentives for banks to serve LMI, unbanked,
underbanked, and rural communities; (3) regulatory burdens associated
with the recordkeeping and reporting requirements and the asset
thresholds for the various CRA examination methods; (4) the need for
clarity regarding performance measures and better training to ensure
consistency and rigor in CRA examinations; and (5) refinement of the
CRA ratings methodology.\13\
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    \12\ The review is required by section 2222 of the Economic
Growth and Regulatory Paperwork Reduction Act of 1996, Public Law
104-208, 110 Stat. 3009, 3311 (1996), codified at 12 U.S.C. 3311
(1996).
    \13\ See Federal Financial Institutions Examination Council,
Joint Report to Congress. Economic Growth and Regulatory Paperwork
Reduction Act, pp. 41-48 (March 2017), available at https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.
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    On April 3, 2018, the U.S. Department of the Treasury (Treasury
Department) also released recommendations based on stakeholder input to
modernize the CRA regulations. These recommendations included updating
the definition of assessment areas, increasing the clarity and
transparency of CRA ratings, improving the timeliness of evaluations,
and incorporating more effective incentives to encourage banks to meet
the credit and deposit needs of their communities.\14\
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    \14\ See Memorandum from the U.S. Department of the Treasury to
the Office of the Comptroller of the Currency, Board of Governors of
the Federal Reserve System, and the Federal Deposit Insurance
Corporation, Community Reinvestment Act--Findings and
Recommendations (April 3, 2018) available at https://home.treasury.gov/sites/default/files/2018-04/4-3-18%20CRA%20memo.pdf.
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    Recognizing the need for modernization, the agencies began to
assess and update the CRA regulatory framework in 2018 by working
together on an Advance Notice of Proposed Rulemaking (ANPR). The OCC
issued the ANPR in August 2018, which reflected feedback and input from
the FDIC and the Board.\15\ The OCC received more than 1,500 comments
from stakeholders and shared these comments with the FDIC and the
Board. Additionally, the OCC and the Board separately engaged with
stakeholders, including civil rights organizations, community groups,
members of Congress, academics, and banks to obtain their perspectives
and feedback on all aspects of the CRA and potential improvements that
could be made to the regulations. Many of those comments reflected the
opinion that the current CRA regulatory framework lacks objectivity,
transparency, and fairness. Numerous stakeholders also commented that
the framework is applied inconsistently and is hard to understand.
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    \15\ See OCC News Release 2018-87 (Aug. 28, 2018); 83 FR 45053
(Sept. 5, 2018).
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    The agencies' extensive engagement with stakeholders confirmed that
the CRA remains a powerful tool for promoting community revitalization
and increasing financial activity in neighborhoods across the country.
However, stakeholders observed that the evaluation of banks' CRA-
qualifying lending, investments, and services (collectively, qualifying
activities or CRA activities) under the current CRA regulations--
including what type of activities count, where they count, and how they
count--is inconsistent, opaque, and complex.
    In response to this feedback, the agencies propose to strengthen
the CRA regulatory framework to better achieve the underlying statutory
purpose of encouraging banks to help serve their communities by making
the framework more objective, transparent, consistent, and easy to
understand. To accomplish these goals, the proposal would clarify which
activities qualify for CRA credit; update where activities count for
CRA credit; create a more objective method for measuring CRA
performance; and provide for more transparent, consistent, and timely
CRA-related data collection, recordkeeping, and reporting. These
changes would encourage banks to serve their entire communities,
including LMI neighborhoods, more effectively through a clearer set of
CRA activities and would provide clarity for all stakeholders.
    The agencies' proposal would establish a regulatory framework with
the goal to encourage banks to conduct more CRA activities and to serve
more of their communities, including those areas with the greatest need
for economic development, investment, and financing needs, such as
urban and rural areas and opportunity zones, that may be underserved by
the current regulations.
II. Background
    Prior to drafting this proposal, the agencies invited and
considered input from a wide range of stakeholders, through a variety
of channels. That input included the strengths, weaknesses, and
challenges of the current framework, as well as ideas for, and the
advantages and disadvantages of, alternative frameworks.
    In 2018, the OCC held numerous meetings with community groups, non-
profit and civil rights organizations, legislators, regulators,
bankers, and other stakeholders to discuss and solicit input on how to
improve the current framework. During this same period, the Treasury
Department invited a diverse group of stakeholders to provide feedback
on how the CRA regulations could more effectively encourage economic
growth in the communities that banks serve. As discussed above, in
April 2018, the Treasury Department released its findings and
recommendations for how to modernize the CRA regulatory framework,
which are consistent with the four components of modernization outlined
in this proposal.\16\
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    \16\ Press Release, U.S. Department of the Treasury, Treasury
Releases Community Reinvestment Act Modernization Recommendations
(April 3, 2018), available at https://home.treasury.gov/news/press-releases/sm0336.
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    In August 2018, the OCC issued an ANPR inviting public input on how
best to improve the CRA regulatory framework to generate more local and
national CD and economic development activities--and thus promote
economic opportunity--by encouraging banks to engage in more lending,
investments, and services that benefit targeted populations (such as
LMI individuals, small farms, and small businesses) and areas in need
of financial services (including LMI communities, rural and urban
areas, and areas targeted by a Federal, state, local, or tribal
government for development). The ANPR sought comment on (1) clarifying,
expanding, and listing the types of activities that qualify for CRA
credit; (2) revisiting how to delineate the areas in which qualifying
activities receive credit; (3) establishing objective ways to evaluate
CRA performance; (4) improving the timeliness of regulatory decisions
related to the CRA; and (5) reducing the cost and burden, and improving
the timely completion, of CRA evaluations.
    During the summer of 2019, the OCC engaged in nationwide outreach
with community advocates, CD professionals, civil rights organizations,
and bankers to discuss opportunities to bring more CRA investment,
lending, and services to underserved areas. This outreach included
visits to rural and urban areas and Indian country. The tours provided
opportunities for the agency's senior leadership to hear CRA success
stories and how the agencies could help CRA work better for everyone.
While these conversations confirmed that CRA has been a force for good
for the past 40 years, they also highlighted the need to strengthen the
regulatory framework to encourage greater CRA activity and to more
effectively reach underserved communities.
    The most consistent feedback that the agencies and the Treasury
Department have received in response to their outreach efforts is that
the current CRA
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framework has not kept pace with changes in banking or technology and
that the CRA regulations and guidance have become cumbersome, outdated,
and complex. Moreover, stakeholders conveyed that the lack of clarity
and transparency of the current framework has restricted lending and
investments in communities across America. For example, stakeholders
expressed concern and frustration that under the current system:
     Ambiguity over what types of activities qualify for CRA
consideration discourages certain types of CRA activity in high-need
areas;
     ``CD'' and ``economic development'' are narrowly defined,
and the current definitions provide little incentive for banks to
engage in many of the loan products, investments, and services that
could help their communities;
     Assessment areas that are only delineated around banks'
physical locations result in geographies where banks do not engage in
or engage in only limited CRA activities (CRA deserts) and fail to
incentivize CRA activity in many rural areas;
     Assessment areas have not kept pace with how consumers
bank and how banking services are delivered today;
     Performance evaluations and ratings are subjective and
inconsistent; and
     Publication of a bank's CRA performance evaluation,
following its CRA evaluation, is often delayed, which can result in a
significant gap between publication of consecutive evaluations.
    The feedback also provided valuable insight from stakeholders and
revealed broad support for modernizing the CRA regulations by
clarifying what type of activities count, updating where CRA activities
count, making performance evaluations more objective, and improving
reporting.\17\ For example, of those ANPR commenters who addressed the
issues below:
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    \17\ For example, comments on the ANPR came from a variety of
stakeholders, including banks and banking industry trade
associations; community, civil rights, and advocacy groups and
community trade associations; CD funds and organizations; academia;
CRA consultants; governmental entities; and the general public. The
OCC also met with commenters to discuss issues related to the ANPR.
Summaries of these meetings, as well as all comments received on the
ANPR, are available at https://www.regulations.gov/docket?D=OCC-2018-0008.
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     The vast majority do not think the current framework is
objective, fair, or transparent;
     The vast majority think the current framework is applied
inconsistently;
     The vast majority say the current framework is hard to
understand;
     The vast majority support publishing a list of eligible
activities;
     The majority support objective measurement of CRA
performance, although they oppose a single metric;
     Many support retaining performance context; and
     The majority support expanding assessment areas.
As discussed below, the changes outlined in this proposal focus on many
of these stakeholders' concerns with the current framework. The
proposed rule is designed to achieve the following positive outcomes
desired by many stakeholders:
     Create incentives to do more--By establishing clear
benchmarks based on historical performance, the proposed rule would
allow regulators to set benchmarks at levels high enough to increase
the level of qualifying lending, investment, and services and adjust
those benchmarks on a periodic basis.
     Reduce CRA deserts--By clarifying how banks can achieve a
satisfactory or an outstanding in their assessment areas and expanding
when banks can receive credit beyond the immediate areas surrounding
bank branches, the new rule would incent greater CRA activity in areas
currently in need of financial resources, including rural areas, areas
identified for aid, distressed areas, and Indian country.
     Limit CRA hotspots--By clarifying and expanding when banks
can receive credit beyond the immediate areas surrounding bank
branches, the proposed rule would relieve pressure in overheated
markets where banks are already meeting community needs.
     Reduce activity uncertainty--By providing clear standards
and an illustrative list of qualifying activities, the proposed rule
would reduce uncertainty regarding what counts for CRA credit and give
banks and stakeholders greater ability to plan reinvestment activities
without the risk of activities not receiving credit. The rule would
also provide processes for confirming an activity would receive CRA
credit.
     Reduce delays in Performance Evaluation (PE) publication--
By making the evaluation of CRA performance more objective and
improving reporting, the revised rule would reduce the time required to
conduct CRA evaluations and produce PEs, improving transparency and
increasing regulatory efficiency.
     Improve the quality of PEs--By making evaluation of CRA
performance more objective and standardized, the proposed rule would
help make PEs more useful, comparable across banks, and meaningful for
stakeholders.
     Increase small business lending--By increasing the loan
size for small loans to business, which was last updated 25 years ago,
and increasing the revenue size threshold for small businesses, the
proposed rule would encourage economic development and job creation.
     Increase small farm lending--By increasing the loan size
for small loans to farms, which was last updated 25 years ago, and
increasing the revenue size threshold for small farms, the proposed
rule would encourage economic development and job creation and help the
U.S. agricultural industry survive.
     Promote capital and investment in Indian country--By
providing credit for retail and community development activities in
Indian country, the proposed rule would help incent more investment and
lending in Indian country. This would help fight persistent poverty and
support basic infrastructure and needs such as housing, technology, and
healthcare.
     Encourage long-term commitment to community reinvestment--
By refocusing on ongoing commitment to lending and investment through
evaluating on-balance sheet activities, the proposed rule would reduce
the current churn and short-term focus of CRA activities, providing
banks more incentive to engage in long-term investments and loans,
which would, in turn, provide community developers and advocates
greater stability and more incentive to engage in longer term strategic
initiatives.
     Reduce displacement by refocusing on LMI individuals and
activities--By emphasizing lending and services provided to or
benefiting LMI individuals, the proposed rule would avoid giving credit
for activities that may contribute to displacement.
     Preserve the importance of branches--By requiring banks to
designate assessment areas surrounding branches, headquarters, and
deposit taking ATMs and including a measure of a bank's distribution of
branches when assessing the impact of CRA activities, the proposed rule
would maintain the importance of branches in assessing a bank's record
of serving its communities.
     Preserve community voices--By retaining performance
context and a means for community stakeholders to share comments and
concerns with examiners about assessment area needs and opportunities,
the proposed rule would preserve community voices and help encourage
banks to meet the needs of their entire communities, including LMI
neighborhoods.
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     Reduce inconsistent application of the rule--By clarifying
what counts and increasing the objectivity of CRA performance
evaluations, the proposed rule would make performance evaluations more
consistent over time and across regions.
     Provide greater flexibility for community banks--The
proposed rule also would provide an opt in for small banks with assets
of $500 million or less to allow the bank to determine whether to be
evaluated under existing performance standards or the revised framework
based on their unique business models.
III. Overview of Proposed Rule
    The proposed rule builds upon the outreach efforts that have been
underway for several years and reflects the agencies' collaborative
process to find solutions to mutually recognized problems. To improve
the current CRA regulatory framework and promote increased lending and
investment consistent with stakeholder feedback, the agencies propose
to make changes in four key areas: (1) Clarifying and expanding what
qualifies for CRA credit; (2) expanding where CRA activity counts; (3)
providing an objective method to measure CRA activity; and (4) revising
data collection, recordkeeping, and reporting. The following sections
provide a brief overview of the proposal's significant changes in those
areas.
A. Clarifying and Expanding What Qualifies for CRA Credit
    The proposal would (1) establish clear criteria for the type of
activities that qualify for CRA credit, which generally would include
activities that currently qualify for CRA credit and other activities
that are consistent with the purpose of CRA but may not qualify under
the current CRA framework; (2) require the agencies to publish
periodically a non-exhaustive, illustrative list of examples of
qualifying activities; and (3) establish a process for banks to seek
agency confirmation that an activity is a qualifying activity.\18\
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    \18\ As discussed below, the agencies are proposing to retain
for certain banks the small bank performance standards applicable to
small banks that are not intermediate small banks in the current
regulations. 12 CFR 25.26, 195.26; 345.26. The agencies intend for
these standards to be applied consistent with the current
regulations except as discussed in this notice of proposed
rulemaking.
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    These changes would address current impediments to engaging in CRA
activities and provide banks with greater certainty and predictability
regarding whether certain activities qualify for CRA credit.
Specifically, by providing banks with greater confidence that
activities qualify for CRA credit before they invest time and resources
in those activities, the proposed rule would incentivize banks to more
readily engage in innovative projects that have a significant impact on
the community. Moreover, by allowing stakeholders to confirm that
activities qualify, the proposal would eliminate the uncertainty in the
current regulations that potentially limited the scope and type of
banks' CRA activities that will benefit banks' communities,
particularly LMI individuals and areas.
    In addition to providing transparency, the proposed qualifying
activities criteria would expand the types of activities that qualify
for CRA credit to recognize that some banks are currently serving
community needs in a manner that is consistent with the statutory
purpose of CRA but are not receiving CRA credit for those activities.
This expansion would ensure that banks help meet the needs of their
entire communities, particularly LMI neighborhoods and other areas and
populations of need. The expanded qualifying activities criteria would
focus on economically disadvantaged individuals and areas in banks'
communities. For example, the proposed qualifying activities criteria
would expand the activities that qualify in areas that have
traditionally lacked sufficient access to financial services, such as
(1) distressed areas; (2) underserved areas, including areas where
there is a great need for banking activities but few banks that engage
in activities (known as banking deserts); and (3) Indian country.
Moreover, to maintain a focus on LMI individuals, the proposal would,
for example, no longer permit a mortgage loan to a high-income
individual living in a low-income census tract to qualify for CRA
credit.
B. Expanding Where CRA Activity Counts
    The proposal would preserve assessment areas surrounding banks'
facilities and expand where CRA activity counts to help banks meet the
needs of their communities. To ensure that CRA activity continues to
have a local community focus where banks maintain a physical presence
and conduct a substantial portion of their lending activity, banks
would still be required to delineate assessment areas around their main
office, branches, or non-branch deposit-taking facilities as well as
the surrounding areas where banks have originated or purchased a
substantial portion of their loans. These areas would be identified as
``facility-based'' assessment areas. In addition, to recognize the
evolution of modern banking (including the emergence of internet
banks), the fact that many banks receive large portions of their
deposits from outside their facilities-based assessment areas, and in
conformity with the CRA's intent to ensure that banks help meet credit
needs where they collect deposits,\19\ the proposed rule would require
banks to delineate additional, non-overlapping ``deposit-based''
assessment areas where they have significant concentrations of retail
domestic deposits. Specifically, a bank that receives 50 percent or
more of its retail domestic deposits from geographic areas outside of
its facility-based assessment areas would be required to delineate
deposit-based assessment areas where it receives five percent or more
of its total retail domestic deposits, based on the physical addresses
of its depositors.
---------------------------------------------------------------------------
    \19\ See, e.g., 123 Cong. Rec. 17630 (1977) (statement of Sen.
William Proxmire, Chairman, S. Comm. on Banking, Housing, and Urban
Affairs).
---------------------------------------------------------------------------
    Banks would receive CRA credit for qualifying activities conducted
in their facility-based assessment areas and deposit-based assessment
areas at the assessment area level and at the bank level, consistent
with the applicable performance standards discussed below. In addition,
the proposal would permit banks to receive CRA credit for qualifying
activities conducted outside of their assessment areas at the bank
level. Under this approach, banks would still be encouraged to meet
local community needs where they have branches and depositors but would
be given flexibility to serve other communities with distinct needs as
these activities would be considered when calculating the overall
dollar value of their qualifying activities under the proposed rule.
This flexible framework could reduce the number of areas where there
are more banks that want to engage in CD activities than there is need
for those activities (known as CD hot spots) and areas where there is a
great need for CD activities but few banks that engage in those
activities (known as CD deserts).
C. Providing an Objective Method To Measure CRA Activity
    Consistent with the current CRA framework, the proposed rule would
include different performance standards applicable to banks of
different sizes. Small banks, as defined under the proposed rule, would
continue to be evaluated under the small bank performance standards
currently applicable to small banks that are not
[[Page 1209]]
intermediate small banks.\20\ The proposed rule also would establish
new general performance standards to evaluate other banks' CRA
activities and the CRA activities of small banks that opt into these
standards.
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    \20\ The proposed rule would define a small bank as a bank that
had assets of $500 million or less in each of the previous four
calendar quarters.
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    The new general performance standards would assess two fundamental
components of a bank's CRA performance: (1) The distribution (i.e.,
number) of qualifying retail loans to LMI individuals, small farms,
small businesses, and LMI geographies and (2) the impact of a bank's
qualifying activities, measured by the value of a bank's qualifying
activities relative to its retail domestic deposits. Both components
would be compared to specific benchmarks and thresholds that would be
established prior to the beginning of a bank's evaluation period. Banks
evaluated under the general performance standards would also be
required to meet a minimum CD lending and investment requirement in
each assessment area and at the bank level to achieve a satisfactory or
outstanding rating.
    The distribution component builds on ideas shared with the agencies
by the Board that provide a quantifiable method to assess what portion
of a bank's major retail lending activities are targeted to LMI
individuals or in LMI areas. The impact component responds to
stakeholder comments about the need for more lending and investment in
areas served by CRA and provides a transparent means of evaluating
those activities and setting benchmarks sufficiently high enough to
incent more CRA activities.
    By providing a transparent and objective way to evaluate a bank's
CRA performance that banks would either be subject to or may opt into,
the proposed rule would incentivize banks to engage in qualifying
activities in their assessment areas and other communities with
identified needs, such as distressed and underserved areas, including
rural and urban areas and Indian country. Moreover, greater certainty
about how engaging in specific qualifying activities would affect bank-
level ratings would enable banks and other stakeholders to monitor CRA
performance on an ongoing basis. It would also enable banks to target
areas of need within their communities, potentially engage in more
qualifying activities, and provide a positive benefit to more
communities.
    In addition, the proposal would preserve and standardize
consideration of performance context, which would allow the agencies to
recognize and account for specific facts and circumstances relating to
a bank's CRA capacity and opportunities in a transparent manner.
    Finally, the proposed regulations would include a strategic plan
option for all banks. This option would address the unique needs of
banks with business models that could not be effectively evaluated
under the proposed objective framework reflected in the general
performance standards or the small bank performance standards, such as
banks that do not have retail domestic deposits or small banks that do
not originate retail loans. Taken together, these features would
appropriately differentiate banks based on their size, location, and
business model.
D. Revising Data Collection, Recordkeeping, and Reporting
    The proposal would require banks evaluated under the small bank
performance standards to collect and maintain, but not to report, data
related to their retail domestic deposits so that the agencies could
validate their deposit-based assessment area delineations, as
applicable. Banks evaluated under the general performance standards
would be required to collect, maintain, and report certain data related
to their qualifying activities, certain non-qualifying activities,
retail domestic deposits, and assessment areas. Those banks would also
be required to use that information to make the calculations necessary
to determine their ratings, based on the application of the performance
standards in the proposal. Prior to a CRA performance evaluation, the
evaluating agency would validate the data used in determining a bank's
ratings. The agencies would provide additional guidance on the data
that banks need to collect and maintain under the proposed rule that
would standardize the information collected and help banks ensure that
they meet the requirements of the rule.
    The agencies believe that access to the standardized information
required by the proposed rule would help them to better measure,
assess, and understand CRA activity across various areas and across the
industry and over time. The proposal's requirements also would provide
the agencies with a better, more comprehensive understanding of an
individual bank's CRA activity. In addition, industry-wide reporting
would enable more effective stakeholder dialogue regarding the
distribution and volume of CRA activity. The agencies expect that these
changes would result in timelier and more efficient CRA evaluations,
which, among other things, would bring greater predictability to agency
actions that consider CRA performance. Moreover, the use of the
objective measures described above would allow performance evaluations
to be written in standardized forms and captured in shorter narratives,
which would contribute to more timely and useful public reporting.
IV. Section-by-Section Discussion
A. Qualifying Activities
    Overview. Under the current regulatory framework, only certain--and
relatively few--bank activities qualify for consideration in CRA
performance evaluations. Whether a bank's activities qualify for
consideration generally depends not only on the characteristics of the
activities but also on where the activities took place. As a general
matter, the types of activities that currently qualify for CRA
consideration fall into two categories: (1) Retail banking activities
and (2) CD activities.
    Under the current framework, retail banking activities generally
include (1) retail loans (i.e., home mortgage loans, small business
loans, small farm loans, and consumer loans) and (2) retail banking
services (i.e., the range of retail deposit services and credit
services, branch distributions, the record of branch openings and
closings, and the availability and the effectiveness of alternative
delivery systems serving LMI individuals and areas). For retail
lending, loan originations and purchases are considered. CD activities
generally include those that finance or support (1) affordable housing
for LMI individuals; (2) economic development by financing small
businesses or small farms; (3) community services for LMI individuals;
and (4) the revitalization or stabilization of LMI census tracts,
distressed nonmetropolitan middle-income census tracts, underserved
nonmetropolitan middle-income census tracts, and designated disaster
areas. For CD activities, activities conducted or originated during the
current evaluation period are considered. For CD investments, prior
period outstanding investments are also considered. Banks also have the
option of receiving consideration for retail and CD activities
conducted by an affiliate, third party, or consortium. In evaluating a
bank's CRA performance, the agencies assess certain factors including
(1) the level of relevant retail lending activity and the geographic
and borrower distribution of that retail lending activity and (2) the
level, responsiveness, innovativeness, complexity, and flexibility of
CD activities.
[[Page 1210]]
    The feedback that the agencies received on the current framework
demonstrates that banks often are uncertain about whether a CD activity
will qualify for CRA consideration until their supervisory agency makes
a determination in a CRA evaluation, often years after the banks
engaged in the activities. Feedback also revealed that many banks and
other stakeholders view the process by which the agencies decide
whether a CD activity qualifies for CRA credit as opaque and
inconsistent from evaluation-to-evaluation, agency-to-agency, and year-
to-year. In addition, stakeholders expressed that the current
definition of CD can be limiting and does not capture many activities
that respond to community needs, including the needs of LMI individuals
and neighborhoods. These concerns create a disincentive for banks to
undertake certain activities or explore new and potentially beneficial
activities, even when these activities would serve the needs of LMI
populations and other communities with needs. The agencies propose to
address these issues in four ways.
    Qualifying activities criteria. First, the proposal would clarify
the activities that qualify for CRA credit. The clarifying criteria
would generally apply to all banks subject to the agencies' CRA
regulations. Consistent with the intent of the CRA statute, the
proposed rule would define a ``qualifying activity'' as an activity
that helps meet the credit needs of a bank's community, particularly
those individuals, areas, and populations with needs. The proposal
would also provide clearly defined qualifying activities criteria that
identify the types of activities that meet the credit needs of banks'
communities and, thus, would be considered qualifying activities. These
criteria would both encompass the many activities that currently
qualify for CRA consideration and include additional activities that
meet the credit needs of economically disadvantaged individuals and
areas in banks' communities.
    Under the proposal, the qualifying activities criteria would
include activities conducted by a bank. The agencies recognize that
there are limited instances where the bank is substantively engaged in
an activity, but the activity is done in the name of another party,
such as an affiliate. In these situations, the bank provides the
economic resources, and the agencies' current practice is to recognize
these activities as being conducted by the bank, at the bank's option.
Under the proposed rule, the agency would recognize activities
substantively conducted by the bank. The proposed qualify activity
criteria would be:
     A retail loan (defined to include home mortgage loans,
small loans to businesses, small loans to farms, and consumer loans
\21\) provided to:
---------------------------------------------------------------------------
    \21\ Under the proposal, a ``consumer loan'' would be defined
with reference to the Call Report and would include credit cards,
other revolving credit plans, automobile loans, and other consumer
loans.
---------------------------------------------------------------------------
    [cir] An LMI individual;
    [cir] A small business; or
    [cir] A small farm;
     A retail loan provided in Indian country.
     A retail loan that is a small loan to a business or a
small loan to a farm located in a low- or moderate-income census tract.
     A CD activity that provides financing for or supports:
    [cir] Affordable housing that partially or primarily benefits \22\
LMI individuals or families or middle-income individuals or families in
high-cost areas;
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    \22\ Under the proposal, a bank would receive credit for the
full dollar value of certain CD activities that primarily benefit a
specified population or area. For those CD activities that only
partially benefit a specified population or area, a bank would
receive pro-rata credit for the dollar value of the activity equal
to the portion that benefited the specified population or area.
---------------------------------------------------------------------------
    [cir] Another bank's CD loan, CD investment, or CD service;
    [cir] Community support services that partially or primarily serve
LMI individuals or families;
    [cir] Essential community facilities that partially or primarily
benefit or serve LMI individuals or areas of identified need;
    [cir] Essential infrastructure that benefits or serves LMI
individuals or areas of identified need;
    [cir] Family farms;
    [cir] Government programs, projects, or initiatives that partially
or primarily benefit LMI individuals (e.g., a program that supports
urban renewal), small businesses, small farms, and areas of identified
need;
    [cir] Financial literacy programs or education or homebuyer
counseling;
    [cir] Owner-occupied and rental housing development, construction,
rehabilitation, improvement, or maintenance in Indian country;
    [cir] Qualified opportunity funds that benefit LMI opportunity
zones;
    [cir] A Small Business Administration Certified Development Company
(SBDC), Small Business Investment Company (SBIC), New Markets Venture
Capital company, qualified Community Development Entity, or U.S.
Department of Agriculture Rural Business Investment Company (RBIC);
    [cir] Technical assistance and supportive services for small
businesses or small farms; or
    [cir] A capital investment, loan participation, or other venture
undertaken by a bank in cooperation with a minority depository
institution, women's depository institution, CDFI, or low-income credit
union that helps to meet the credit needs of the institution's or
credit union's local communities, including through activities that
indirectly help to meet community credit needs by promoting the
institution's or credit union's sustainability and profitability.\23\
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    \23\ For example, a cooperative venture would include donating,
selling on favorable terms, or making available on a rent-free basis
a branch of a bank that is in a primarily minority census tract to a
minority depository institution or women's depository institution. A
cooperative venture would also include a bank that is not a minority
depository institution, women's depository institution, CDFI, or
low-income credit union making a deposit at one of these types of
institutions.
---------------------------------------------------------------------------
    Regarding CD activities, the phrase ``provides financing for or
supports'' would be interpreted broadly to include all lending,
investment, and service activities that are related to the CD
qualifying activities criteria. For example, activities that finance
the development, rehabilitation, improvement, or maintenance of
affordable housing or essential community facilities, such as a public
hospital that serves the entire community including the community's LMI
residents, would be qualifying activities because the activities
provide financing for or support the housing or hospital. The
rehabilitation, improvement, or construction of affordable housing,
essential community facilities, or essential infrastructure may include
(1) renewable energy, energy-efficiency, or water conservation
equipment or projects associated with affordable housing, essential
community facilities, or essential infrastructure or (2) the abatement
or remediation of, or other actions to correct, environmental hazards,
such as lead-based paint, lead pipes (such as those used in antiquated
water supply systems), asbestos, mold, or radon that is present in the
housing, facilities, or site where the housing or facilities are
located. An activity that meets more than one of the criteria would be
treated as a single qualifying activity.
    Scope of qualifying activities. Second, the proposed criteria would
expand the scope of the activities that qualify for CRA credit. This
expansion is intended to recognize the many ways banks may meet the
credit needs of their communities, particularly LMI communities,
through activities that are consistent with the statutory purpose of
the CRA. Under the proposal,
[[Page 1211]]
expansions to the retail lending criteria would include:
     Home mortgage loans and consumer loans provided in Indian
country. The agencies received feedback from commenters on the ANPR and
during outreach that emphasized the lack of access to cost-effective
capital and banking services in Indian country. Providing CRA credit
for home mortgage loans and consumer loans in Indian country helps to
address these critical needs.
     Small loans to businesses and small loans to farms
provided to (1) small businesses or small farms in census tracts of all
income levels or (2) businesses or farms in LMI census tracts. The
proposal would increase the size thresholds for a small loan to a
business and a small loan to a farm to $2 million or less. Consistent
with the current regulations' definitions of small business loan and
small farm loan, the proposed definitions are based on the size of the
loan to the business or farm. Loans of $2 million or less to a business
or farm would be considered qualifying activities if they (1) are
provided to small businesses or small farms or (2) are located in LMI
census tracts. The increase would, in part, account for inflation since
the $1 million loan limit for loans to small businesses and $500,000
for loans to small farms were established in 1995. The proposal would
include a provision for adjusting these loan limits for inflation going
forward.
    The proposal would define home mortgage loans with reference to the
Call Report instead of the Home Mortgage Disclosure Act (HMDA). As a
result of this revision, construction loans for 1-4 family residential
properties would be included as home mortgage loans. Consumer loans
would also be defined with reference to the Call Report and included in
all CRA evaluations. In addition, the small business and small farm
revenue thresholds would be increased to $2 million in part to account
for inflation since the revenue size limits were established. As with
the size thresholds for a small loan to a business and a small loan to
a farm, the proposal would include a provision for adjusting the
revenue limits for inflation going forward.
    Under the proposal, expansions to qualifying CD activities would
include:
     Expanding the affordable housing criterion by clarifying
that it:
    [cir] Encompasses ``naturally occurring affordable housing'' (e.g.,
unsubsidized rental housing with rents that are affordable to LMI
individuals and families). The current regulations could be interpreted
to provide consideration these types of activities; however, the
regulations do not expressly include these activities as qualifying CD
activities and the CRA guidance is not sufficiently clear about whether
they receive CRA credit. The proposal would clarify the criteria to
incentivize banks to meet the affordable housing needs of their
communities through a variety of activities; and
    [cir] Includes rental housing for low-, moderate-, and middle-
income individuals in high-cost areas. The Interagency Questions and
Answers Regarding Community Reinvestment (Interagency Questions &
Answers) \24\ explain that examiners can account for conditions in
high-cost areas in banks' CRA evaluations. The proposal would clarify
the criteria to incentivize banks to meet the affordable housing needs
of their communities through a variety of activities including
workforce housing that would allow public employees, such as teachers,
police officers, and firefighters, to live close to the communities
they serve.
---------------------------------------------------------------------------
    \24\ The agencies have published the Interagency Questions and
Answers Regarding Community Reinvestment in the Federal Register. 81
FR 48506 (July 25, 2016).
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     Adding a criterion for activities that help finance or
support another bank's CD loans, CD investments, or CD services.
Including this criterion and expanding the definition of CD loan and
investments to include certain commitments to lend and invest,
discussed below, would address the fact that community banks understand
community needs best but often are unable to provide the necessary
funding or service alone. In these cases, large banks may finance the
project, benefitting from community banks' efforts to identify areas of
need. This criterion would address stakeholders' recommendations that
the CRA regulatory framework do more to encourage inter-bank
collaboration and allow community banks to remain involved in projects
that they identified and enabled.
     Adding a criterion for essential community facilities,
such as schools and hospitals, that benefit or serve LMI individuals,
LMI census tracts, or other targeted areas of need, such as distressed
areas or Indian country. Under the current regulation, the Interagency
Questions & Answers regarding activities that revitalize or stabilize
underserved nonmetropolitan middle-income census tracts reference
essential community needs, which include certain essential community
facilities or infrastructure projects; however, activities that finance
or support these projects may also meet other CD definitions. By adding
a criterion for essential community facilities, the proposal would also
clarify when these activities receive credit and incentivize banks'
lending and investment activities related to these facilities.
     Adding a criterion for essential infrastructure, such as
roads, mass transit, or water supply and distribution, that benefits or
serves LMI individuals, LMI census tracts, or other targeted areas,
such as Indian country. As discussed above, certain essential
infrastructure projects may receive credit under the current CRA
regulations as CD activities. The addition of the essential
infrastructure criterion would acknowledge the importance of these
types of projects to communities by ensuring that essential
infrastructure activities receive CRA credit if they include some
benefit for LMI individuals, LMI census tracts, or other areas of need
(e.g., an investment in a mass transit project that serves the public,
including LMI individuals, would be a qualifying activity).\25\ The
addition also would recognize that essential infrastructure projects
are often community-wide projects for which it is not feasible to
allocate the benefit to specific populations or areas.
---------------------------------------------------------------------------
    \25\ In contrast, a loan supporting the infrastructure necessary
to connect an upper-income housing development to a water main line
would not meet this criterion, if there were no LMI residents in the
development.
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     Adding a criterion for federal, state, local, or tribal
government programs, projects, or initiatives that partially or
primarily benefit LMI individuals, small businesses, small farms, LMI
census tracts, or other targeted areas of need, such as distressed or
underserved areas. Although many programs, projects, or initiatives
covered by this criterion would qualify under the current CD
definitions, this new criterion would ensure that all activities that
meet this definition receive CRA credit. As previously indicated, the
agencies believe that, in many circumstances, communities are in the
best position to identify their needs and design projects, programs,
and initiatives that help to address those needs. This criterion would
ensure that activities related to both existing and future programs
that benefit certain populations and areas of need will receive CRA
credit, even if the activities do not meet one of the other CD
criteria, such as affordable housing. Including this criterion would
reduce the circumstances in which sections or subsections of the
regulations become obsolete due to the inclusion of specific
[[Page 1212]]
programs that expire or are repealed. For example, the CD definition in
the CRA regulations previously included qualifying Neighborhood
Stabilization Program (NSP)-related activities that benefit low-,
moderate-, and middle-income individuals and geographies in NSP-target
areas. These references have since been removed because, after March
2016, NSP-eligible activities no longer received consideration as CD
activities under the CRA.
     Adding a criterion for family farm purchases or leases of
farm land, equipment, and other inputs or the sale and trade of family
farm products, as well as for technical assistance and supportive
services. The agencies believe that this criterion would benefit
communities that banks serve because a healthy farm economy supports
many rural and regional economies.
     Adding a criterion for financial literacy programs or
education or homebuyer counseling that benefits individuals of all
income levels. The agencies believe that financial literacy is an
important issue irrespective of income level. Moreover, some
stakeholders expressed support for providing CRA credit for financial
literacy programs for all individuals. These stakeholders cited high
levels of student and credit card debt and a lack of retirement and
other savings as reasons for providing broader consideration of
financial literacy-related activities.
     Adding a criterion for owner-occupied and rental housing
development, construction, rehabilitation, improvement, or maintenance
in Indian country. This criterion would address concerns expressed by
stakeholders about the significant housing needs in Indian country that
affect individuals of all income levels.
     Adding a criterion for qualified opportunity funds, as
defined in 26 U.S.C. 1400Z-2(d)(1), that benefit qualified opportunity
zones in LMI tracts, as defined in 26 U.S.C. 1400Z-1(a). This criterion
would incentivize banks to help meet the needs of LMI individuals and
tracts located in opportunity zones, which are communities the federal
government has identified as needing economic development and job
creation.
     Adding CDFIs to the criterion for ventures undertaken by a
bank in cooperation with a minority depository institution, women's
depository institution, or low-income credit union. The proposal would
include CDFIs in this criterion to recognize that the goal of these
institutions is to expand economic opportunities in low-income
communities by providing access to financial products and services for
local residents and businesses.
    In addition to these expansions, the affordable housing criterion
would include activities that finance or support owner-occupied housing
purchased, refinanced, or improved by LMI individuals or families,
except for home mortgage loans provided directly to LMI individuals or
families. This aspect of the criterion would encompass, for example, an
investment provided to a non-profit that constructs or rehabilitates
affordable housing for purchase by LMI individuals. In addition, this
aspect of the criterion would capture mortgage-backed securities (MBS)
while excluding retail home mortgage loans. Although these activities
receive credit under the current regulation, this aspect of the
criterion would ensure that they continue to receive credit under the
more detailed qualifying activities criteria in the proposal.
    Furthermore, the proposal would clarify and expand the type of
activities that qualify for CRA credit through revisions to the
definitions used in the qualifying activities criteria. The proposal
would revise the definitions of CD loans and CD investments \26\ to
include commitments to lend and invest, respectively, that are reported
on the Call Report, Schedule RC-L, and meet the CD activities
criteria.\27\
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    \26\ The proposal would replace the term ``qualified
investment'' in the current regulation with the term ``CD
investment.''
    \27\ The Call Report, Schedule RC-L, covers contingent and
legally binding commitments to lend and invest, respectively.
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    Loan participations that have a primary purpose of CD currently
qualify and would continue to qualify. To further support collaboration
between large banks and community banks, the proposal would provide
credit for a bank's allowance for credit losses that are reported on
the Call Report, Schedule RC-G, if the bank commits to provide
additional funding as required in certain contingencies. For example, a
large bank would receive credit if it committed to financing potential
cost overruns, the threat of which could cause the community bank to
avoid the project entirely.\28\ Similarly, a project may require a bank
to commit funds in advance but because banks face investment
limitations,\29\ advance commitments, though often necessary to a
project, can be restrictive, particularly for community banks. The
proposal would provide credit for the dollar value of legally-binding
commitments to invest that meet the CD criteria.
---------------------------------------------------------------------------
    \28\ Banks would continue to receive CRA credit for the funded
portions of lines of credit but generally would not receive CRA
credit for other legally-binding commitments to lend, such as
revolving credit lines and letters of credit.
    \29\ See, e.g., 12 CFR part 24.
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    The proposal also would revise the definitions of distressed
nonmetropolitan middle-income area and underserved nonmetropolitan
middle-income area to include additional census tracts where there are
unmet financial needs. Specifically, the requirement that a distressed
area be a nonmetropolitan area would be removed to recognize that there
may be urban areas that experience high rates of poverty, unemployment,
or population loss and need financial resources. Although the agencies
also considered lowering the poverty threshold in the definition of
distressed area to as low as 15 percent, they decided to retain the 20
percent threshold because it is consistent with the threshold used in
some other Federal programs that are intended to benefit low-income
communities, such as the New Markets Tax Credit program. The proposal
also would revise the definition of underserved area to remove the
requirement that these census tracts be nonmetropolitan areas; this
change would address urban banking deserts that lack access to
financial services. Under the proposal, an underserved area would be a
census tract with:
     A population size, density, and dispersion that indicate
the area's population is sufficiently small, thin, and distant from a
population center that the tract is likely to have difficulty financing
the fixed costs of meeting essential community needs; or
     a census tract that does not have a bank branch in the
tract and does not have a bank branch within:
    [cir] Two miles of the center of the census tract if it contains
only urban census blocks;
    [cir] five miles of the center of the census tract if it contains
urban and rural census blocks;
    [cir] ten miles of the center of the census tract if it contains
only rural census blocks; or
    [cir] five miles of the center of the census tract if it is an
island area, as defined by the Federal Financial Institutions
Examination Council (FFIEC) Census data.
Due to the lack of banking and other services in underserved areas, the
agencies believe that the CRA regulations should incentivize banks to
meet the retail lending and CD needs of the residents in these
geographies.
    In addition, under the proposal, the CRA regulations would no
longer require that CD services be related to the
[[Page 1213]]
provision of financial services (i.e., banks would receive credit for
all volunteer hours, including manual labor, provided to a CD project).
This expansion recognizes that support for a CD project may take many
forms, all of which are required for the project to meet the needs of a
community, and that all these forms of support should qualify for CRA
credit, consistent with the goals of CRA. Under the proposed general
performance standards, all activities conducted by the bank--including
those engaged in by another party, such as an affiliate--would be
considered, as opposed to at a bank's option as is done under the
current framework. Banks evaluated under the small bank performance
standards would continue to have the option of requesting consideration
for these qualifying activities.
    The proposal also would expand the circumstances in which banks
receive pro-rata credit for qualifying activities. Under the current
regulations, banks receive credit for the pro-rata share of a loan or
investment in mixed-income housing that includes a set-aside required
by Federal, state, or local government for affordable housing for LMI
individuals. Under the proposal, all CD activities that provide some
benefit to, but do not primarily benefit, specified populations,
entities, or areas would receive pro-rata credit equal to the partial
benefit provided. This change recognizes that 100 percent of the
portion of an activity that benefits LMI individuals and families,
small businesses, small farms, or identified geographies would meet the
CD criteria in the proposal (i.e., a bank would receive credit for 40
percent of the dollar value of a grant that supports a non-profit
organization which provides after care and activities to a school where
40 percent of the students are eligible for free or reduced price
school lunches).
    Further, as stated above, the intended effect of the proposal is to
expand the type of activities that qualify for CRA credit. Although the
agencies chose not to include in the proposal certain ambiguous or
unclear terms used in the current regulations, the agencies do not
intend to reduce the activities that qualify for CRA credit. For
example, the qualifying activities criteria would no longer use the
current regulatory phrase ``revitalize and stabilize'' to describe the
activities that would qualify in targeted areas, such as distressed or
underserved areas; instead, the proposal describes in greater detail
the criteria for activities that would qualify in these locations.
Similarly, rather than including the term ``economic development,'' the
proposal employs more detailed CD criteria to capture the type of
activities that currently qualify as economic development activities,
such as activities that finance (1) SBDCs, SBICs, New Markets Venture
Capital companies, qualified Community Development Entities, or RBICs;
(2) businesses or farms that meet the size-eligibility standards of the
SBDC or SBIC by providing technical assistance and supportive services;
or (3) Federal, state, local, or tribal government programs, projects,
or initiatives that partially or primarily benefit small businesses, or
small farms. The proposal does not include the more general aspect of
economic development that involved a bank having to demonstrate that
its activities that finance businesses or farms that met the size test
\30\ support job creation, retention, and improvement for LMI
individuals, LMI census tracts, and other areas targeted for
redevelopment by Federal, state, local, or tribal governments. This
aspect of the economic development component of the current CD
definition was not retained because the agencies could not identify an
objective method for demonstrating job creation, retention, or
improvement for LMI individuals or census tracts or other targeted
geographies, other than by determining if the activity would create
additional low-wage jobs.
---------------------------------------------------------------------------
    \30\ Under the current regulations, as interpreted in the
Interagency Questions & Answers, a business or farm meets the size
test if it finances, either directly, or through an intermediary,
businesses or farms that either meet the size eligibility standards
of the SBDC or SBIC programs or have gross annual revenues of $1
million or less. See Interagency Questions and Answers, Q&A
_.12(g)(3)-1, 81 FR 48506, (July 25, 2016).
---------------------------------------------------------------------------
    Focus on ongoing commitment. Third, the proposal seeks to address
the concern that the current framework gives too much CRA credit to
certain activities, such as credit for the full value of frequently
traded MBS, regardless of how long they remain on a bank's balance
sheet and even when they do not result in new qualifying activities.
The proposal would ensure that a bank's balance sheet reflects its
ongoing commitment to CRA. To accomplish this goal, the proposal would
give a bank CRA credit for the average month-end outstanding amount on
a bank's balance sheet (on-balance sheet) of any qualifying loan or CD
investment. The proposal would credit the bank for the amount of CD
services and monetary and in-kind donations made during the period.
This approach would help to eliminate the apparent inflation of the
level of a bank's CRA activity that results from banks purchasing loans
or investments just prior to a CRA evaluation and then selling those
loans and investments when the evaluation is complete.
    Qualifying activities list. Finally, the proposal provides that the
agencies would maintain a publicly available non-exhaustive,
illustrative list of examples of qualifying activities that meet the
criteria in the rule, as well as examples of activities that the
agencies have determined, in response to specific inquiries, do not
qualify. The proposal would also establish a process for a bank to
submit a form through the agency's website to seek agency confirmation
that an activity is a qualifying activity.\31\
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    \31\ The agencies expect to treat the information provided to
them through this process as nonpublic and to maintain the
confidentiality of that information subject to applicable law. Banks
and interested parties may designate information as confidential or
request confidential treatment. The OCC will treat confidential
commercial information submitted to the agency in accordance with 12
CFR 4.16. The FDIC will treat confidential commercial information
submitted to the agency in accordance with 12 CFR 309.6.
---------------------------------------------------------------------------
    The illustrative list generally would be updated each time an
activity is confirmed to be or determined not to be a qualifying
activity; however, depending on the circumstances, an activity may not
be added to the list (e.g., if it presents circumstances unique to the
requesting bank or would be duplicative of an activity already on the
list). If it is determined that an activity would not be added to the
list, this determination would be made available to the public. The
agencies anticipate that banks would use this qualifying activities
confirmation process sparingly and that it would not replace a bank's
ability to discuss whether an activity qualifies with its examiners or
making its own determination, by applying the proposed qualifying
activities criteria, that an activity qualifies for CRA credit. Banks
would not be required to obtain confirmation from its appropriate
Federal regulatory agency for each CRA activity, and qualifying
activities would not be limited to those on the illustrative list.
    In addition to updating the illustrative list on an ongoing basis,
the proposal provides that the list would also be revised at least
every three years, through a public notice and comment process, to add
activities that meet the criteria and to remove activities that no
longer meet the criteria (e.g., if broadband were universally available
and no longer considered to be essential infrastructure). If it were
determined that an activity no longer meets the criteria, a bank with
that activity on-balance sheet would continue to receive
[[Page 1214]]
credit if the obligation remains on-balance sheet; however, that
activity would not be considered a qualifying activity for any
subsequent purchasers. The agencies would consult and coordinate with
each other on the content of the proposed list. The initial proposed
illustrative list is available for review on the agencies' websites and
in section V of this proposal.
    Summary of objectives. Together, the proposed rule's qualifying
activities provisions are intended to provide certainty and
transparency about whether an activity qualifies for CRA credit prior
to a bank engaging in the activity, and to ensure consistent treatment
of activities across and within the agencies. By increasing the
specificity used to describe qualifying activities and predictability
about whether specific activities would count, these proposed
provisions are also intended to encourage banks to undertake more CRA
activities--including novel, complex, and innovative activities--that
help meet local community needs. In particular, the qualifying
activities provisions would incentivize banks to commit more financial
resources to the populations and areas that need them most, such as LMI
individuals, distressed areas, underserved areas, and Indian country.
The agencies expect that banks would only conduct qualifying activities
that are consistent with safe and sound banking practices.
    Calculating the qualifying activities value. The current framework
includes a qualitative and quantitative assessment of the dollar value
and number of CRA activities, but it does not set a threshold for the
total dollar volume of CRA activities in evaluating CRA performance nor
does it provide a uniform method for assessing banks' performance
context. Under the proposal, banks evaluated under the general
performance standards would determine their presumptive ratings at the
bank level and in each assessment area by first calculating their
qualifying activities values, which are the sum of the quantified
dollar value of qualifying activities that receive credit (after being
adjusted by multipliers, as explained below). Qualifying activities
would be quantified as follows:
     Qualifying loans and CD investments would be valued based
on their average month-end on-balance sheet dollar value, except that
qualifying retail loans originated and sold within 90 days of their
origination date would be valued at 25 percent of their origination
value.
     Legally-binding commitments to invest that are reported on
the Call Report, Schedule RC-L, would be valued based on their average
month-end dollar value.
     Qualifying commitments to lend would be valued based on
the average month-end dollar value of the allowance for credit losses
on those commitments that are reported on the Call Report, Schedule RC-
G.
     CD services and monetary or in-kind donations would be
credited at the value of the monetary donation or in-kind activity or
at the hourly salary as estimated by the Bureau of Labor Statistics for
the job category of the service provided for the number of hours
provided.
If a CD activity partially benefits the intended population or area,
then the quantified value would be a pro-rata share of the full
quantified dollar value of the activity, as described above, equal to
the percentage of partial benefit.
    The quantified value of qualifying activities to CDFIs, other CD
investments (not including MBS and municipal bonds), and other
affordable-housing related CD loans would be adjusted upward by a
multiple of two to provide an incentive for banks to engage in these
activities. In addition to these activities, the agencies are also
considering whether to apply multipliers to smaller CD loans, such as
two, which may be particularly important to small non-profits with a CD
purpose.
    A bank would calculate its bank-level and assessment area
qualifying activities values by taking the sum of the quantified values
of all qualifying activities, adjusted by any applicable multiplier, as
follows:
[GRAPHIC] [TIFF OMITTED] TP09JA20.002
    Although banks would still be able to make large investments in MBS
under the proposal, concerns related to frequent trading of MBS under
the current regulations are mitigated because banks evaluated under the
proposed general performance standards would only receive credit in the
calculation of their CRA evaluation measure, described below, for the
dollar value of MBS for the period that the investment remains on-
balance sheet. For example, if a bank purchased a qualifying MBS on
January 1, 2019 and sold the MBS on February 1, 2019, the bank would
receive one twelfth of the value of the MBS when it calculated its
annual qualifying activities value.
    Alternatives considered. The agencies considered additional ways to
expand credit for retail lending and CD activities to individuals who,
although not designated as low- or moderate-income, nonetheless have
objectively low incomes. These included providing CRA credit for retail
loans and CD activities to middle-income individuals in (1) distressed
areas; (2) underserved areas; (3) persistent poverty counties, which
have a poverty rate of 20 percent or more over the last 30 years; and
(4) any census tract where the area median income is less than the
national median income. To retain the focus on LMI individuals,
however, the proposal does not include these revisions.
    The agencies also considered limiting the dollar value that any
single transaction could contribute to the qualifying activities value
to address concerns that measuring performance based on the dollar
value of banks' qualifying activities could incentivize banks to engage
in a small number of large dollar activities that may be less
responsive to community needs than other activities. Because the
proposal assesses the performance of banks that are subject to the
general performance standards by considering the distribution of retail
lending activities and the dollar value of qualifying activities, as
discussed below, the agencies do not believe that a single transaction
limit is necessary. Moreover, a single transaction limit could have
unintended consequences and discourage banks from conducting activities
that would help meet the needs of a specific community. For example,
competition and capacity constraints may limit the number and type of
qualifying activities available to a bank.
    The agencies invite comment on all aspects of the proposal related
to establishing clear criteria for the type of activities that would
qualify for CRA credit and determining the dollar value of qualifying
activities, including with respect to the following questions:
[[Page 1215]]
    1. Are the proposed criteria for determining which activities would
qualify for credit under the CRA sufficiently clear and consistent with
the CRA's objective of encouraging banks to conduct CRA activities in
the communities they serve?
    2. Are there other criteria for determining which activities would
qualify for CRA credit that the agencies should consider?
    3. Under the proposal, CD activities conducted in targeted areas,
such as Indian country or distressed areas, would qualify for CRA
credit. Should there be any additional criteria applicable to the types
of CD activities that qualify for CRA credit in these areas? If so,
what should those criteria be?
    4. Under the proposal, the small business and small farm revenue
thresholds and the size thresholds for a small loan to a business and a
small loan to a farm would increase to $2 million. Do these increases
appropriately incentivize banks to engage in small business and small
farm lending activities, or should other changes be made to the revenue
and loan size thresholds?
    5. The agencies plan to publish the illustrative list on their
websites and to update the list both on an ongoing basis and through a
notice and comment process. Should the list instead be published as an
Appendix to the final rule or be otherwise published in the Federal
Register? In addition, how often should the list be updated?
    6. The proposal includes a process for updating the illustrative
list on an ongoing basis through submission of a form to seek agency
confirmation. The agencies considered an alternative process where an
agency would accept all requests from banks for confirmation that an
activity is a qualifying activity, aggregate these requests, publish
the list of requested items in the Federal Register for public comment
and feedback, and update the list following this process once every six
months. What process, including any alternative process, should the
agencies adopt to update the illustrative list of qualifying
activities?
    7. Are certain types of retail loans more valuable to LMI
individuals and geographies than other types? If so, which types?
Should the regulations recognize those differences? If so, how? For
example, could multipliers be used to recognize those differences and
provide incentives for banks to engage in activities that are scarce
but highly needed?
    8. The use of multipliers is intended to incentivize banks to
engage in activities that benefit LMI individuals and areas and to
other areas of need; however, multipliers may cause banks to conduct a
smaller dollar value of impactful activities because they will receive
additional credit for those activities. Are there ways the agencies can
ensure that multipliers encourage activities that benefit LMI
individuals and areas while limiting or preventing the potential for
decreasing the dollar volume of activities (e.g., establishing a
minimum floor for activities before a multiplier would be applied)?
    9. The proposal quantifies the value of CD services based on the
compensation for the type of work engaged in by the employees providing
the services as reflected in the Bureau of Labor Statistics calculation
of the hourly wage for that type of work. Alternatively, CD services
could be valued based on a standardized compensation value for the
banking industry or occupation type. For example, the median hourly
compensation value for the banking industry is approximately $36, when
calculated using Bureau of Labor Statistics data. Would using
standardized compensation values reduce the burden associated with
tracking CD services while still appropriately valuing CD services? If
so, how should the agencies establish the standardized compensation
values?
    10. Should the range of retail banking services provided--such as
checking accounts, savings accounts, and certificates of deposit--be
considered under this proposal? If so, how could retail banking
services be quantified? For example, could the types of checking and
savings accounts that are offered by a bank (e.g., no fee, fixed fee,
low interest-bearing, high interest-bearing) be considered in
performance context?
B. Assessment Areas
    Under the current framework, a bank's CRA performance is measured
within the bank's assessment areas or the greater statewide or regional
area(s) that includes the bank's assessment areas. With limited
exceptions, a bank is required to delineate assessment areas consisting
of one metropolitan statistical area (MSA), one or more metropolitan
divisions (MD), or one or more contiguous political subdivisions (e.g.,
counties, cities, or towns). Assessment areas must include any census
tract where a bank has its main office and any census tract where it
has one or more branches or deposit-taking automated teller machines
(ATMs), as well as the surrounding census tracts in which the bank has
originated or purchased a substantial portion of its loans. A bank may
adjust the boundaries of an assessment area to include only the portion
of a political subdivision that it reasonably can be expected to serve.
Finally, an assessment area must consist only of whole census tracts
and not reflect illegal discrimination, arbitrarily exclude LMI census
tracts, or extend substantially beyond an MSA or state boundary unless
the assessment area is in a multistate MSA (MMSA).
    Wholesale banks, which are banks without retail customers (e.g.,
home mortgage and small business customers), and limited purpose banks,
which are banks that offer limited products (e.g., credit cards or
automobile loans), have these same rules for delineating assessment
areas, except that their assessment area delineations only include the
MSAs, MDs, or whole political subdivisions that contain these banks'
main office, branches, and deposit-taking ATMs. Military banks, whose
business predominately consists of serving the needs of military
personnel or their dependents, are not required to have geographic
assessment areas and may delineate their entire deposit customer base
as their assessment area.
    The current method for delineating a bank's assessment areas, which
is focused on the areas surrounding brick-and-mortar bank locations, is
challenged by how today's consumers meet their banking needs and banks
provide services. The current approach creates disincentives for banks
to meet the needs of their entire communities or even their own
customers if their communities or customers are located outside of the
banks' assessment areas. These disincentives serve to create CRA
deserts and promote CRA hotspots.
    To address this, the proposed rule would establish a modernized and
standardized process for identifying where a bank's qualifying
activities receive credit that would apply to banks subject to the
agencies' CRA regulations. Under the proposal, banks (except for
military banks) \32\ would be required to serve the communities where
they have a physical presence and would also be required to serve the
surrounding geographies where they originated or purchased a
substantial portion of their loans (consistent with the current rules).
In addition, to recognize changes in the banking industry--including
the increasing number of banks that operate primarily through the
internet or
[[Page 1216]]
otherwise serve customers located far from the banks' physical
locations--and the statutory purpose of the CRA to help ensure that
banks reinvest in the communities where they collect deposits,\33\ the
proposal would also require a bank with a significant portion of its
retail domestic deposits outside of its facility-based assessment
areas, such as 50 percent or more, to delineate additional assessment
areas wherever it has a concentration of retail domestic deposits.
---------------------------------------------------------------------------
    \32\ The proposal would retain the requirement that a military
bank be evaluated based on its entire deposit customer base,
regardless of geographic location.
    \33\ See, e.g., 123 Cong. Rec. 17630 (1977).
---------------------------------------------------------------------------
    Regarding assessment areas based on physical presence, a bank would
delineate a ``facility-based'' assessment area where it has its main
office, a branch, or a deposit-taking facility, as well as any
surrounding geographies where the bank has originated or purchased a
substantial portion of its loans. The proposal would require a bank to
delineate these facility-based assessment areas in any of the following
areas: (1) An MSA; (2) the whole nonmetropolitan area of a state; (3)
one or more whole, contiguous MDs in a single MSA; or (4) one or more
whole contiguous counties or county equivalents in a single MSA or non-
MSA area. The agencies would provide banks the option to choose the
geographic level at which to delineate their facility-based assessment
areas because the agencies believe that banks are in the best position
to determine the areas that their facilities serve.
    Beyond their brick-and-mortar locations, the proposal would require
banks that receive more than 50 percent of their retail domestic
deposits from outside of their facility-based assessment areas to
delineate separate, non-overlapping ``deposit-based'' assessment areas
in the smallest geography where they receive five percent or more of
their retail domestic deposits. These deposit-based assessment areas
would capture banks' evolving business models, address the increasing
competition for deposits outside of banks' current assessment areas,
and encourage banks to serve their entire communities--including where
they take deposits--in harmony with the CRA statute. These deposit-
based assessment areas would consist of (1) a state; (2) a whole MSA;
(3) the whole nonmetropolitan area of a state; (4) one or more whole,
contiguous MDs in a single MSA; (5) the remaining geographic area of a
state, MSA, nonmetropolitan area, or MD other than where it has a
facility-based assessment area; or (6) one or more whole, contiguous
counties or county equivalents in a single MSA or non-MSA. Unlike
facility-based assessment areas where banks may choose the geographic
level where they delineate their assessment areas, the agencies believe
that banks should be required to delineate deposit-based assessment
areas at the smallest geographic level where they receive five percent
or more of their retail domestic deposits to help ensure that banks'
deposit-based assessment area ratings reflect their qualifying
activities in the same areas as their concentrations of deposits. For
example, if a bank receives 60 percent of its retail domestic deposits
from outside of its facility-based assessment area and 5 percent of
these deposits come from Cook County, Illinois, which is not in a
facility-based assessment area, it must delineate Cook County as a
deposit-based assessment area.
    In addition, the agencies recognize that there are certain
communities of need where banks have a limited physical or deposit-
taking presence. To help ensure that these areas are served, the
proposed rule would allow banks to receive credit for qualifying
activities conducted outside of their assessment areas in determining
their bank-level ratings.
    The proposal would allow a bank to change its assessment area
delineation once during each evaluation period and would no longer
permit a bank to adjust an assessment area's boundaries to include only
the portion of a political subdivision that it reasonably can be
expected to serve. The proposal would, however, retain the requirements
that a bank's assessment areas must not reflect illegal discrimination
or arbitrarily exclude low- or moderate-income geographies.
    Summary of objectives. Taken together, the proposal's assessment
area provisions would create an affirmative obligation for banks to
conduct CRA activity in the communities where they operate (determined
by where they have a physical presence), conduct a substantial portion
of their lending, or collect a substantial portion of their deposits.
Through these changes, the proposed rule would both (1) preserve the
important connection between a bank's physical locations and the
surrounding community by addressing the CRA obligations of traditional
banks, which engage in most of their business at their physical
locations and (2) reflect critical changes to how customers bank in the
21st century by considering the activity of nontraditional banks,
including internet banks. In addition, allowing banks to receive credit
for CRA activities outside of their assessment areas when determining
bank-level ratings would help to eliminate CRA hot spots and banking
deserts and incentivize investment and lending to all communities
served by the bank.
    Alternatives Considered. In developing this proposed rule, the
agencies considered alternative approaches for delineating assessment
areas where banks conduct a significant amount of business outside of
their physical locations. For example, the agencies considered
requiring banks to delineate additional assessment areas only where
they have a concentration of deposits. The agencies also considered
adopting a hybrid approach that would have required delineation of
assessment areas where banks derive a significant concentration of
deposits and conduct a significant amount of lending. Because a
deposit-based approach closely aligns with the CRA statute--to address
the harm caused by banks taking deposits from certain communities and
investing them elsewhere--the proposal includes the approach based on
deposits.\34\ However, to maintain consistency with the current
framework and recognize the importance of evaluating a bank's lending
in the areas surrounding its facilities where it has originated or
purchased a substantial portion of its retail lending, the proposal
also would require a bank to delineate a facility-based assessment area
around areas where it has a main office, a branch, or a deposit-taking
facility as well as the surrounding areas where it has originated or
purchased a substantial portion of its retail lending.
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    \34\ See, e.g., 123 Cong. Rec. 17630 (1977) (statement of Sen.
William Proxmire, Chairman, S. Comm. on Banking, Housing, and Urban
Affairs) (``I am talking about the fact that banks . . . will take
their deposits from a community and instead of reinvesting them in
that community . . . they will actually or figuratively draw a red
line on a map around the areas of their city, sometimes in the inner
city, sometimes in the older neighborhoods, sometimes ethnic and
sometimes black, but often encompassing a great area of their
neighborhood.'')
---------------------------------------------------------------------------
    Regarding the assessment area thresholds, the proposed rule
requires banks that receive 50 percent or more of their retail domestic
deposits from outside of their facility-based assessment areas to
delineate deposit-based assessment areas where they receive five
percent or more of their retail domestic deposits. The agencies are
considering a range around those thresholds; specifically, the agencies
are considering a range between 40 and 60 percent for the percentage of
retail domestic deposits outside of banks' facilities-based assessment
areas and between two and eight percent for the percentage that
determines where banks would delineate their deposit-based assessment
areas.
[[Page 1217]]
    The agencies invite comment on all aspects of the proposal related
to establishing a modernized and standardized process for identifying a
bank's community--i.e., assessment area(s)--in which the bank's
qualifying activities receive credit, including with respect to the
following questions:
    11. Are the proposed methods for delineating assessment areas
clear, simple, and transparent?
    12. The proposal would allow banks to choose how broadly to
delineate their facility-based assessment areas, but it would require
banks with a significant portion, such as 50 percent or more, of their
retail domestic deposits outside of their facility-based assessment
areas to delineate their deposit-based assessment areas at the smallest
geographic area where they receive five percent or more of their retail
domestic deposits. The requirement to designate deposit-based
assessment areas would impact internet banks that do not rely on
branches or ATM facilities to collect deposits as well as traditional
banks that, in addition to their branches and ATM facilities, collect a
significant portion of their deposits online outside of their branch
and ATM footprint. Do these approaches strike the right balance between
allowing flexibility and ensuring that banks serve their communities?
If not 50 percent, what threshold should be used to determine if a bank
has a significant portion of its deposits outside of its facility-based
assessment areas and why? In addition, is receiving at least five
percent of domestic retail deposits from a given area the appropriate
threshold for requiring a bank to delineate a deposit-based assessment
in that area, or should some other threshold be implemented? If so,
why?
    13. The deposit-based assessment area delineation requirements are
intended to ensure that banks serve the communities in which they
operate. However, under the proposed regulation, it is possible that
few banks would be required to delineate a deposit-based assessment
area in less populous areas or states, despite having a significant
market share in those areas (although banks with branches in those
areas would be required to delineate facility-based assessment areas
and banks may receive credit for qualifying activities outside of their
assessment areas conducted in these areas or states). Does this
framework provide sufficient incentives for banks to conduct qualifying
activities in these less populous areas? Alternatively, should banks be
required to delineate separate, non-overlapping assessment areas in
each state, MSA, MD, or county or county equivalent in which they have
at least a certain percentage of the deposit market share--regardless
of what percentage of the bank's retail domestic deposits are derived
from a given area--and, if so, what should the percentage of the
deposit market share be?
C. Objective Method To Measure CRA Performance
    Overview. The current CRA regulations provide different methods to
evaluate a bank's CRA performance depending on the bank's asset size
and business strategy. For each type of bank, the agencies evaluate all
or a portion of its retail and CD activities. For example, in 2019,
banks with less than $321 million in assets in either of the two prior
calendar years were evaluated under a retail lending test, and various
types of CD activities also may be considered. For banks evaluated in
2019 with $1.284 billion or more in assets in 2017 or 2018, all CD
lending and investments and all retail and CD services are evaluated.
Based on the agency's evaluation of the bank's relevant qualifying
activities, its performance context, and evidence of discriminatory and
other illegal credit practices, a bank receives a rating of
outstanding, satisfactory, needs to improve, or substantial
noncompliance.
    Because of the subjective nature of the current framework, exactly
how an agency determines the appropriate rating is at times opaque,
complex, and inconsistent. Although the current framework describes in
general terms the parameters that an agency uses to weigh and score a
bank's relevant qualifying activities, important terms in the
parameters are undefined and the processes are unspecified. For
example, the agencies are required to assess the geographic
distributions of loans. For banks other than small banks and
intermediate small banks, as those terms are defined under the current
regulations, an ``excellent'' geographic distribution correlates with
an ``outstanding'' rating, and a ``good'' distribution correlates with
a ``satisfactory'' rating--but both ``excellent'' and ``good'' are
undefined. Similarly, under the current regulations, the undefined term
``reasonable geographic distribution'' equates to satisfactory
performance for small banks and intermediate small banks. Furthermore,
there is no stated quantity of CRA activities that correlates to a
particular rating category. With respect to qualifying services, the
current framework does not quantify their value, and the agencies
undertake a qualitative analysis of the range of such services.
    To achieve the goal of providing a method of assessing CRA
performance that would be more objective, clear, and consistent and
facilitate banks' ability to engage in qualifying activities in
communities that need it the most, the proposed rule would establish
new general performance standards used to evaluate banks that are not
small banks. The proposal would allow small banks to opt into the
general performance standards as described below; those that do not opt
in would be evaluated under small bank performance standards consistent
with the current regulations. The new general performance standards
would evaluate banks' CRA activities by assessing two fundamental
components: (1) The appropriate distribution (i.e., number) of
qualifying retail loans to LMI individuals, small farms, small
businesses, and LMI geographies in a community and (2) the impact
(i.e., quantified value) of a bank's qualifying activities.
    To ensure that the distribution of the number of CRA retail loans
and the total value of qualifying activities would be captured and
assessed, the proposed rule would provide that the ratings for a bank
evaluated under the general performance standards would be based on a
combination of approaches. Specifically, to receive a presumptive
rating of satisfactory or outstanding at the assessment area level, (1)
banks would be required to meet the minimum thresholds for performance
on the applicable retail lending distribution tests in that assessment
area for each major retail lending product line with at least 20 loans
in that assessment area and (2) the average of banks' CRA evaluation
measures (described in more detail below) for an evaluation period
would have to meet the associated empirical benchmark. By only
evaluating a bank's distribution of retail loans in areas where the
bank has at least 20 loans in a major retail lending product line, this
approach would be tailored to a bank's business strategy and product
offerings at the bank and assessment area level.
    At the bank level, a bank's presumptive rating would be based on
the comparison of its average bank-level CRA evaluation measure to the
established empirical benchmark, except that a bank could not receive a
satisfactory or an outstanding unless it also received that rating in a
significant portion, such as more than 50 percent, of its assessment
areas and in those assessment areas where it holds a significant amount
of deposits, such as more than 50 percent. At both the bank
[[Page 1218]]
and assessment area level, banks evaluated under the general
performance standards would also be required to meet minimum CD lending
and investment requirements to achieve a satisfactory or outstanding
rating. This method of evaluation would incentivize banks to increase
the dollar volume of their CRA activities, ensure that banks that are
retail lenders are distributing their retail loans to LMI individuals,
small farms, small businesses, and farms and business in LMI
communities, and recognize the importance of CD lending and investments
to LMI individuals and communities.
    The proposal would define retail domestic deposits as total
domestic deposits of individuals, partnerships, and corporations, as
reported on Schedule RC-E, item 1, of the Call Report, but exclude
brokered deposits. This proposed definition would exclude municipal
deposits and deposits from foreign governments or entities and thus
would be more reflective of a bank's capacity to engage in CRA-
qualifying activities. By further excluding brokered deposits, which
are not associated with any individual or community, this definition
would refine the Call Report definition to more accurately reflect the
deposits a bank collects from identifiable individuals and communities.
Additionally, this definition would leverage an existing Call Report
definition of deposits to lessen associated data collection,
recordkeeping, and reporting burdens.
    Under this proposal, for a bank evaluated under the general
performance standards to meet the outstanding or satisfactory
presumptive rating categories in an assessment area: (1) Its
performance on the geographic and borrower lending distribution tests
would have to meet or exceed the established thresholds for performance
for each of its major retail lending product lines with at least 20
loans in that assessment area and (2) the average of its annual
assessment area CRA evaluation measures would have to meet or exceed
the established benchmarks.
    The chart below illustrates possible ways to achieve each
presumptive ratings category associated with the statutory rating
categories in a given assessment area. The agencies included specific
empirical benchmarks for each rating category in the proposed rule that
they believe would help achieve the positive outcomes intended by this
rulemaking (i.e., an empirical benchmark of (1) 11 percent for
outstanding, (2) six percent for satisfactory, (3) three percent for
needs to improve, and (4) less than three percent for substantial
noncompliance). The agencies selected the specific empirical benchmarks
from within ranges for each rating category that reflect the agencies'
analysis of the available lending and investment data, discussed below.
----------------------------------------------------------------------------------------------------------------
                                        Retail lending
          CRA evaluation              distribution tests        CD minimums        Presumptive rating  category
----------------------------------------------------------------------------------------------------------------
The average of a bank's annual      A bank meets the       The quantified value  Outstanding.
 assessment area CRA evaluation      established            of community
 measures meets or exceeds 11        thresholds for all     development loans
 percent (selected from a range of   the retail lending     and community
 10 to 15 percent).                  distribution tests     development
                                     for its major retail   investments in the
                                     lending product        assessment area,
                                     lines in that          divided by the
                                     assessment area.       average of the
                                                            bank's assessment
                                                            area retail
                                                            domestic deposits
                                                            must meet or exceed
                                                            2 percent.
The average of a bank's annual      A bank meets the       The quantified value  Satisfactory.
 assessment area CRA evaluation      established            of community
 measures meets or exceeds 6         thresholds for all     development loans
 percent (selected from a range of   the retail lending     and community
 5 to 10 percent).                   distribution tests     development
                                     for its major retail   investments in the
                                     lending product        assessment area,
                                     lines in that          divided by the
                                     assessment area.       average of the
                                                            bank's assessment
                                                            area retail
                                                            domestic deposits
                                                            must meet or exceed
                                                            2 percent.
The average of a bank's annual                                                   Needs Improvement.
 assessment area CRA evaluation
 measures meets or exceeds 3
 percent (selected from a range of
 2 to 5 percent).
The average of a bank's annual                                                   Substantial Non-compliance.
 assessment area CRA evaluation
 measures is less than 3 percent
 (selected from a range of 0 to 5
 percent).
----------------------------------------------------------------------------------------------------------------
    The bank-level presumptive rating under the general performance
standards would be determined by comparing the average of a bank's
average bank-level annual CRA evaluation measures to the established
empirical benchmarks for the statutory rating categories and
determining if the bank had a satisfactory or outstanding in a
significant portion, such as more than 50 percent, of its assessment
areas, and in those assessment areas where it holds a significant
amount of deposits, such as more than 50 percent. In addition, the bank
would be required to meet the minimum requirements for CD lending and
investment at the bank level.
    As discussed below, the proposed rule would establish empirical
benchmarks for the average of a bank's annual CRA evaluation measures
for each rating category and the thresholds for the retail lending
distribution tests. A bank would use the empirical benchmarks and
thresholds in effect on the first day of its evaluation period for the
duration of its evaluation period. Because the proposed evaluation
method would be sufficiently flexible to account for different bank
sizes and business models, it would not include different tests for
different types and sizes of banks.
    The proposal identifies the rating resulting from the comparison of
the bank's CRA evaluation measure to the corresponding empirical
benchmarks and geographic and borrower distribution tests as
``presumptive'' because this rating could be adjusted based on
consideration of performance context and discriminatory or other
illegal credit practices. These possible adjustments are discussed
below. Following any adjustments, the agency
[[Page 1219]]
would determine a bank's assigned rating in each of its assessment
areas and at the bank level.
    Twelve U.S.C. 2906(d) of the CRA statute requires the agencies to
provide a written evaluation, including a rating, for banks with
interstate branches at the state level, MMSA level, or both, as
applicable. The content of that written evaluation must (1) state
conclusions for each assessment factor (i.e., the small bank
performance standards for small banks and the borrower and geographic
distribution tests, CRA evaluation measure comparison, and CD minimums
for banks subject to the general performance standards); (2) discuss
the facts and data supporting conclusions; and (3) contain the rating
and a statement describing the basis for the rating.\35\ For these
banks, the state or MMSA level rating is the lowest rating assigned to
a significant number of its assessment areas within that state or MMSA.
---------------------------------------------------------------------------
    \35\ The CRA statute provides:
    States: For a bank that maintains domestic branches in 2 or more
states, the appropriate Federal financial supervisory agency must
prepare--(A) a written evaluation of the entire bank's record of CRA
performance, as required by subsections (a), (b), and (c) of 12
U.S.C. 2906 and (B) for each State in which the institution
maintains 1 or more domestic branches, a separate written evaluation
of the bank's record of CRA performance within such state, as
required by subsections (a), (b), and (c) of 12 U.S.C. 2906. See 12
U.S.C. 2906(d)(1).
    MMSAs: For a bank that maintains domestic branches in 2 or more
states within an MMSA, the appropriate Federal financial supervisory
agency must prepare a separate written evaluation of the bank's
record of CRA performance within such MMSA, as required by
subsections (a), (b), and (c) of 12 U.S.C. 2906. See 12 U.S.C.
2906(d)(2).
---------------------------------------------------------------------------
    Section 2906(b)(1)(B) of the CRA statute also requires the agencies
to conclude, but not rate, at the MSA and nonmetropolitan area level.
Under this proposal, the agencies' conclusion at these levels would be
the lowest rating assigned to a substantial portion of assessment areas
in that MSA or nonmetropolitan area.
    Applying the retail lending distribution tests. The retail lending
distribution tests would apply to banks evaluated under the general
performance standards. The retail lending distribution tests would be
applied at the assessment area level to a bank's major retail lending
product lines with at least 20 originations in the assessment area
during the evaluation period. A major retail lending product line is
defined at the bank level and is any retail lending product line that
composes at least 15 percent of the bank's overall dollar volume of
retail loan originations during the evaluation period. The agencies
would require at least 20 originations in an assessment area before
applying a retail lending distribution test to ensure that the rule
only evaluates a bank's retail lending distribution in markets where it
is engaged in retail lending beyond lending done on an accommodation
basis. Under the proposal, banks would apply the retail lending
distribution tests, and the agencies would validate their performance.
    The retail lending distribution tests would evaluate the bank's
originations in each assessment area during the review period using
both a geographic distribution test and a borrower distribution test
for small loans to businesses and small loans to farms and a borrower
distribution test for home mortgage and consumer lending. The
geographic distribution test assesses a bank's distribution of lending
in LMI areas while the borrower distribution test assesses a bank's
distribution of lending to LMI borrowers or small businesses or small
farms. A bank can pass either test by meeting or exceeding a threshold
associated with the demographic comparator, which is based on the
demographics of the given assessment area, or a threshold associated
with the peer comparator, which is based on peers' performance in the
given assessment area.
    Although the agencies remain committed to encouraging banks to meet
the credit needs in LMI areas, for banks evaluated under the general
performance standards, the proposal would not apply a geographic
distribution test to a bank's consumer and home mortgage product lines.
Under the geographic distribution test in the current CRA framework,
banks receive positive consideration for home mortgage and consumer
loans made in LMI areas, even if they are made to middle- or upper-
income individuals or families. Unlike small loans to businesses and
small loans to farms in LMI areas that may result in additional job
creation or other positive effects for the larger community, home
mortgage and consumer loans to middle- or upper-income individuals and
families in LMI areas are generally not as beneficial to LMI
communities and may result in displacement. Accordingly, this proposal
would not apply the geographic distribution test to these banks' home
mortgage and consumer product lines. The result of this is that under
the proposal, a mortgage loan to a high-income individual living in a
low-income census tract would no longer qualify for CRA credit. The
agencies' commitment to encouraging banks to meet the credit needs in
LMI communities and neighborhoods is reflected in the proposal's
retention of the geographic distribution test for small business and
small farm product lines. However, because the agencies would apply the
small bank performance standards consistent with the current
regulations, small banks would continue to be evaluated based on the
geographic distribution of their home mortgage loans and consumer
loans, as applicable.
    Under the proposal, a bank subject to the retail lending
distribution tests would not be able to achieve a presumptive rating of
satisfactory or outstanding without passing all applicable distribution
tests for all major retail lending product lines in that assessment
area. To pass a distribution test, a bank would have to meet or exceed
the minimum thresholds for either the demographic comparator or the
peer comparator. For example, if the threshold for the demographic
comparator is set at 55 percent of the relevant demographic comparator
and the threshold for the peer comparator is set at 65 percent of the
relevant peer comparator, a bank would be required to meet either the
55 percent demographic comparator threshold or the 65 percent peer
comparator threshold to pass the distribution test. In other words, to
pass the geographic distribution test using the demographic comparator,
the percentage of a bank's small loans to businesses (SLB) that are in
LMI census tracts in the assessment area (AA) divided by the percentage
of businesses in LMI census tracts in the assessment area would have to
be greater than or equal to 55 percent, which would be calculated as
follows:
[[Page 1220]]
[GRAPHIC] [TIFF OMITTED] TP09JA20.000
The agencies would collect and provide public data that would allow
banks to apply the borrower distribution tests for home mortgage and
consumer loans, small loans to businesses, and small loans to farms,
and the geographic distribution test for small loans to farms and small
loans to businesses. However, the agencies recognize that, even if the
proposal were implemented, the available data for the small loans to
businesses and small loans to farms borrower distribution tests may be
insufficient and, therefore, banks may need to rely on private
datasets. Because banks may have to purchase access to these datasets,
the agencies invite comment on options for tailoring this requirement
by, for example, allowing banks below a certain asset size to use
publicly available data as a proxy.
    Calculating the CRA evaluation measure. The CRA evaluation measure
would be applicable to banks subject to the general performance
standards. The CRA evaluation measure would be an objective measure of
a bank's ongoing commitment to CRA and would be determined annually at
the bank level and for each of its delineated assessment areas, as
defined above.\36\ A bank would initially calculate its CRA evaluation
measure by taking the sum of (1) a bank's qualifying activities value,
as described above, divided by the average of its quarterly retail
domestic deposits and (2) a calculation that accounts for a bank's
branch distribution. The agencies would validate that calculation.
---------------------------------------------------------------------------
    \36\ A bank's assessment area CRA evaluation measures are used
to reach a conclusion in each MSA where the bank has deposit-taking
facility or main office, as required by the CRA statute.
---------------------------------------------------------------------------
    The first portion of the CRA evaluation measure reflects a bank's
ongoing commitment to CRA by measuring the value of qualifying
activities as a proportion of total retail domestic deposits. The
second portion of the CRA evaluation measure accounts for the social
value and economic impact of bank branches in LMI areas, Indian
country, underserved areas, and distressed areas by measuring a bank's
proportion of branches in those areas. Specifically, the number of the
bank's branches located in LMI census tracts, Indian country,
underserved areas, and distressed areas during the same annual period
used to calculate the qualifying activities value would be divided by
the bank's total number of branches in that annual period and
multiplied by .01.
[[Page 1221]]
This calculation would quantify a bank's distribution of branches and
increase a bank's CRA evaluation measure by up to one percentage point
based on the proportion of a bank's branches in those specified areas.
The agencies believe that valuing branch distribution at up to one
percentage point of the CRA evaluation measure accounts for the
significance of branches to these areas while placing primary emphasis
on the qualifying activities that banks conduct in their communities.
The CRA evaluation measure would be calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP09JA20.001
    Empirical benchmarks, thresholds, and the definition of a major
retail lending product line. The proposal would establish the
thresholds for the demographic and peer comparators for each of the
geographic distribution and borrower distribution tests. The proposal
would also establish the empirical benchmarks for the average CRA
evaluation measure \37\ associated with each rating category. These
empirical benchmarks and thresholds are, and would be, based, in part,
on the agencies' analysis of the currently available historical data.
Specifically, the agencies reviewed the FFIEC CRA data, HMDA data on
home mortgages to LMI borrowers, Call Report data on-balance sheet
value of home mortgages, consumer loans, small business and small farm
loans, and credit bureau data on the outstanding balances of consumer
loans. Although these data sources have some limitations,\38\ by using
all the sources together, collecting additional information about CD
investments from historical performance evaluations,\39\ and making a
limited number of assumptions (described below), the agencies were able
to estimate what each bank's average CRA evaluation measure would have
been from 2011-2017 under the framework in the proposal for all banks
that filed a Call Report.
---------------------------------------------------------------------------
    \37\ The ``average CRA evaluation measure'' generally refers to
the average of the annual assessment area or bank-level CRA
evaluation measures for an evaluation period.
    \38\ For example, under the current CRA regulations, only banks
that are above the small bank asset size threshold, which is $1.284
billion for 2019, are required to report CRA data to the FFIEC and
not all banks are HMDA reporters. 12 CFR 25.12(u)(1), 195.12(u)(1),
345.12(u)(1). Additionally, both the CRA FFIEC data and the HMDA
data look at originations and purchases and not the on-balance sheet
value of loans or investments. Although the Call Report and credit
bureau data do provide the outstanding amount of loans and
investments, those data sources do not identify which balances are
related qualifying activities. Moreover, the proposal would expand
the criteria for qualifying activities in a number of ways,
including by increasing the loan size threshold for small loans to
businesses and small loans to farms from $1 million to $2 million.
Accordingly, the currently available data on CRA qualifying
activities would not fully capture all activities that would be
qualifying under the proposal.
    \39\ The agencies used a sample of performance evaluations
completed between 2011 and 2018. The sample contained data from over
200 exams for banks above the small bank asset size threshold, which
adjusts yearly and is $1.284 billion for 2019.
---------------------------------------------------------------------------
    Since the CRA evaluation measure would generally focus on the on-
balance sheet value of qualifying loans and investments, the agencies
first identified the categories on the Call Report that could include
qualifying loans and investments and then used additional data sources
such as the existing FFIEC CRA, HMDA, and credit bureau data to
estimate what portion of the activity reported on the Call Report would
be qualifying activities under the proposal. To estimate the dollar
volume of on-balance sheet activity that would be qualifying activity
the agencies did the following:
     For home mortgage loans, by bank and year, the agencies
identified all HMDA reportable loans originated and held within the
calendar year to LMI individuals,\40\ and then divided the sum of the
dollar volume of those loans by the bank's total dollar volume of loans
originated and not sold within that calendar year. This provides an
estimate of a bank- year-specific proportion of identified qualifying
loans that was used to calculate the bank's proportion of on-balance
sheet qualified home mortgage loans. For banks that are not HMDA
filers, the agencies used the median proportion of qualifying home
mortgage loans of all HMDA filers for that year.\41\ Note that the
estimated proportions are based on the proportion of qualifying
originations, not on the proportions of qualifying on-balance sheet
loans. As such, to the extent that these proportions differ, the
estimate of the on-balance sheet value of qualifying mortgage loans may
be an over- or underestimate.
---------------------------------------------------------------------------
    \40\ Excluded from this are home mortgage loans in disaster
areas and in Indian country.
    \41\ This was applied to about 40 percent of the banks.
---------------------------------------------------------------------------
     For small business and small farm loans, as defined under
the current regulations, the agencies used the FFIEC CRA data to
estimate the proportion of the bank's on-balance sheet small business
and small farm loans that qualify for CRA credit because they are
originated to businesses or farms with revenues of less than $1 million
or in LMI census tracts that are less than $1 million . Because the
proposal would increase the size of small loans to businesses and small
loans to farms that would be qualifying from the current small business
loan threshold of $1 million and small farm loan threshold of $500,000
to $2 million and banks do not separately report the on-balance sheet
value of loans between the existing thresholds and $2 million, the
agencies used, based on additional data sources, a fraction of the
dollar volume of loans that were reported on the Call Report as less
than $500,000 or $1 million to estimate the dollar volume of loans that
were less than $2 million.
     For credit card,\42\ automobile loan, and other consumer
loan \43\ balances, to estimate the proportion of a bank's on-balance
sheet consumer loans that are qualifying, the agencies used credit
bureau data.\44\ The agencies combined the credit bureau data with
FFIEC's demographic information at the census tract level \45\ to
identify whether a given account holder resides in an LMI census tract.
Since the credit bureau data does not include income level, the
agencies calculated the proportion of credit card loan balances
attributable to residents of LMI tracts and used that proportion to
represent the proportion of balances attributable to LMI borrowers.\46\
---------------------------------------------------------------------------
    \42\ The agencies included the following credit bureau debt
categories in the credit card definition: Credit card, bank card,
flexible spending card, retail lending card, and line of credit.
    \43\ The credit bureau loan categories included are: Other,
personal finance, and student loan.
    \44\ The credit bureau data contain balances by debt category,
along with census tract location of the borrower.
    \45\ For the period 2005-2011, FFIEC uses Census 2000 census
tract definitions and demographic information based on Census 2000.
For the period 2012-2016, FFIEC uses Census 2010 census tract
definitions and American Community Survey (ACS) 2006-2010 data. For
the period 2017-2018, FFIEC uses census tract definitions and
demographics from 2011-2015 ACS. Note that this method introduces
some error due to the fact that the credit bureau uses Census 2000
census tract definitions, while FFIEC uses Census 2000 or Census
2010 census tract definitions depending on the year.
    \46\ The agencies do not believe this method significantly
overestimates the proportion of LMI borrowers or share of balances
attributed to them because while this methodology incorrectly
includes middle- and upper-income borrowers in LMI census tracts, it
also incorrectly excludes LMI borrowers in middle- and upper-income
census tracts. Because the two sources of error work in opposite
directions, the agencies expect them to cancel each other out to a
significant extent.
---------------------------------------------------------------------------
[[Page 1222]]
     For CD Investments, the agencies relied on a sample of
performance evaluations completed between 2011 and 2018. The sample
contains over 200 exams for banks above the small bank asset size
threshold, which adjusts yearly and is $1.284 billion for 2019. The
agencies approximated the value of investments on a bank's balance
sheet by calculating the sum of the balances of prior investments as of
the beginning of the evaluation period plus the average annual new
investments over the evaluation period. The agencies then calculated
the median investments-to-domestic-deposits ratio by asset size bucket
(i.e., assets greater than $100 billion, $5 to $100 billion, and less
than or equal to $5 billion) for the performance evaluation sample.\47\
This median ratio was then used to impute CD investments for all
institutions subject to CRA, by multiplying a bank's deposits in a
given year with the ratio corresponding to its asset size bucket. A
limitation of this approach is that the median ratio by asset size used
for imputation is only based on banks above the small bank asset size
threshold, and it is possible that this ratio differs for smaller
banks.
---------------------------------------------------------------------------
    \47\ Asset size buckets were determined by data explorations of
the relationship between the investments-to-deposits ratio and asset
size, in conjunction with sample size considerations.
---------------------------------------------------------------------------
     For CD loans, the agencies relied on the FFIEC CRA data
that contains information on the dollar amount of CD loans originated
that year.
    By using these estimates, the agencies were able to approximate
what the CRA evaluation measure under the proposed framework would have
been for all banks from 2011-2018. In addition to the data, to set the
initial benchmarks for the average CRA evaluation measure and the
thresholds for the retail lending distribution tests, the agencies
analyzed banks' past performance evaluations, which provide qualitative
information to help inform what level of performance should be required
for each rating category. The agencies also considered unmet needs and
opportunities, such as those in banking and CD deserts, market
conditions, and the overall policy goal of increasing CRA activities.
The agencies would publish the empirical benchmarks for the average CRA
evaluation measures that correspond with each rating category and the
thresholds for the retail lending distribution test with the final
rule.
    Based on the agencies' review of these factors thus far, the
agencies believe that the average CRA evaluation measure benchmarks
associated with each rating category should be set at between ten and
15 percent for outstanding, five and ten percent for satisfactory, and
two and five percent for needs to improve. As discussed above, the
proposal would set 11 percent as the initial benchmark for outstanding,
six percent as the initial benchmark for satisfactory, and three
percent as the initial benchmark for needs to improve. An average CRA
evaluation measure of less than three percent would be associated with
the substantial noncompliance rating category.
    The agencies are aware, however, that there are some limitations in
the data currently available including that available data do not
currently include, for example, the dollar volume of CD investments or
a quantification of the dollar value of CD services. In addition,
available data do not necessarily map perfectly to the configuration of
assessment areas specified in this proposal. Deposit data also have
limitations because the current reporting framework records deposits by
attributing them to a branch location, rather than the account holder's
address and uses a different definition of deposits than the proposed
rule. The proposed rule would remedy these deficiencies by leveraging
data that are readily available but not currently reported in an
integrated and accessible manner. Over time, the data collection,
recordkeeping, and reporting requirements in this proposal would remedy
the current data limitations. Further, after the issuance of this
notice of proposed rulemaking and prior to the issuance of any final
rule, the agencies plan to request additional data through a public
request for information from banks and other interested parties to
supplement the currently available data.
    Until the data limitations are addressed, the agencies would
consider the historical data of reported lending and compare it to
historical levels of total domestic deposits to determine the specific
empirical benchmarks for CRA evaluation measures that are applicable at
the bank and assessment area levels within the ranges set forth in the
proposal. The agencies would then review and adjust these empirical
benchmarks and make them available publicly to promote transparency and
predictability. The agencies expect to adjust these empirical
benchmarks every three years, or sooner if warranted.
    The proposal also defines major retail lending product lines as any
retail lending product line that composes at least 15 percent of the
bank's overall dollar volume of retail loan originations during the
evaluation period. Regarding this definition, the agencies reviewed
HMDA and FFIEC CRA data on the dollar volume of retail loan
originations along with Call Report data on the on-balance sheet value
of consumer loans. Because the Call Report only includes on-balance
sheet values, the agencies assumed that the quarterly change in the on-
balance sheet value of consumer loans reflects new consumer loan
originations.
    CD minimums. The general performance standards would establish
minimums for a bank's quantified value of CD lending and investment as
compared to retail domestic deposits at both the assessment area and
bank level to achieve a satisfactory or an outstanding rating. The CD
minimums included in the proposal were informed by the analysis of the
currently available historical data, described above. To achieve a
presumptive rating of satisfactory or outstanding, the sum of the
quantified value of community development loans and community
development investments, divided by the average of the bank's retail
domestic deposits would need to meet or exceed two percent. The CD
minimums would apply at both the assessment area and bank level. These
minimums reflect the agencies' judgment that CD lending and investment
are critically important to serving banks' local communities.
    Performance context. Under the current framework, a bank's CRA
performance is judged in the context of information about a bank and
its assessment area(s), including (1) relevant demographic data (e.g.,
median income levels, distribution of household income, nature of
housing stock, housing costs); (2) lending, investment, and service
opportunities; and (3) the bank's product offerings and business
strategy, capacity and constraints, past performance, and performance
of similarly situated lenders. Under the proposed framework,
performance context would remain important. The proposal sets forth
performance context factors that the agencies would consider in
determining a bank's assigned ratings in each assessment area and at
the bank level. Banks subject to the general performance standards
would submit performance context information in a standardized format
using a form on the agency's website that relies on the performance
context factors, discussed below. In addition, the agencies would
establish examination procedures to
[[Page 1223]]
help ensure that examiners apply performance context consistently.
    The performance context factors focus on the capacity of the bank
to engage in qualifying activities and the demand for and opportunity
to engage in qualifying activities in the communities that the bank
serves. In considering a bank's capacity, the agencies would assess its
business strategy, size, and other factors that affect its engagement
in qualifying activities, including structural or other constraints on
a bank's ability to engage in the volume of CD lending and investment
required to meet the CD minimums, if applicable. Regarding the demand
for and opportunity to engage in qualifying activities in a bank's
community, the agencies would consider public comments related to
community needs and opportunities and assess the characteristics of the
community served by the bank, such as economic conditions and
demographics, as these factors relate to the demand for and the
opportunity to engage in qualifying activities. The agencies would
consider how differences between actual and expected levels in
qualifying activities were affected by a bank's capacity and
opportunity, including local market conditions and events during the
relevant period, or bank characteristics, such as product offerings and
business strategy, changes in the assessment area needs and
opportunities, and bank-specific constraints such as financial
condition or safety and soundness considerations. For example,
consideration of performance context could be particularly important
for a bank that does not engage in retail lending activities because
its business model limits the range of qualifying activities in which
the bank may engage. The agencies could also consider innovativeness,
complexity, difficulty, or positive impact on the bank's assessment
areas or significant qualifying activities, as well as differences in
banks' business models that affected the volume and types of qualifying
activities. Finally, the agencies could consider a bank's investments
in promoting and supporting the community reinvestment expertise of its
staff and the development of products and services that benefit LMI
communities.
    Discriminatory or other illegal credit practices. Under the
proposal, an agency's evaluation of a bank's CRA performance would be
adversely affected by evidence of discriminatory or other illegal
credit practices. Specifically, in assigning a CRA rating, an agency
would first evaluate a bank's performance for the applicable time
period and then make any adjustments to the presumptive rating that
would be warranted based on evidence of discriminatory or other illegal
credit practices, consistent with the relevant agency's policies and
procedures.
    Strategic plans. The proposal retains the option for a bank to
develop a strategic plan for addressing its CRA responsibilities and to
be evaluated based on its performance under the plan. Under the
proposal, a bank's strategic plan would be developed with public
participation and would demonstrate how the bank would help meet the
credit needs--particularly the needs of LMI census tracts and
individuals--of its assessment area(s) and at the bank level through
qualifying activities. Today, although any bank may request to be
evaluated under a strategic plan, only a limited number of banks with
unique business models or other unique circumstances use them. Because
the proposal would not add additional eligibility requirements for
strategic plans, the agencies expect that strategic plans would
continue to be used in a similar manner. For example, a de novo bank
could develop goals under a strategic plan that reflect its projected
branch footprint and deposit growth, its planned lending activities,
and its anticipated capacity to engage in qualifying activities.
Additionally, banks with no retail domestic deposits and banks
evaluated under the small bank performance standards that do not
originate retail loans would be required to submit a strategic plan.
    Small bank performance standards. The current CRA regulations
include specific performance evaluation standards for small banks and
intermediate small banks.\48\ Specifically, a small bank is evaluated
pursuant to a lending test that considers the bank's:
---------------------------------------------------------------------------
    \48\ 12 CFR 25.26, 195.26, 345.26.
---------------------------------------------------------------------------
     Loan-to-deposit ratio, adjusted for seasonal variation,
and, as appropriate, other lending-related activities, such as loan
originations for sale to the secondary markets, community development
loans, or qualified investments;
     The percentage of loans and, as appropriate, other
lending-related activity in the bank's assessment area(s);
     The bank's record of lending to and, as appropriate,
engaging in other lending-related activities for borrowers of different
income levels and businesses and farms of different sizes;
     The geographic distribution of the bank's loans; and
     The bank's record of taking action, if warranted, in
response to written complaints about its performance in helping to meet
credit needs in its assessment area(s).\49\
---------------------------------------------------------------------------
    \49\ 12 CFR 25.26(b), 195.26(b), 345.26(b).
---------------------------------------------------------------------------
    The current regulations assign small bank ratings based on the
lending test. A small bank is eligible for a ``satisfactory'' rating
under the lending test if it demonstrates a:
     Reasonable loan-to-deposit ratio;
     Majority of its loans in its assessment area(s);
     Distribution of loans to businesses and farms of different
sizes that is reasonable given the demographics of its assessment
area(s);
     Record of taking appropriate action in response to written
complaints, and
     Reasonable geographic distribution of loans given the
bank's assessment area(s).\50\
---------------------------------------------------------------------------
    \50\ 12 CFR part 25, Appendix A, paragraph (d)(1)(i), part 195,
Appendix A, paragraph (d)(1)(i), part 345, Appendix A, paragraph
(d)(1)(i).
A small bank that meets all of those standards and exceeds some or all
of them may warrant consideration for a lending test rating of
``outstanding.'' \51\ To determine whether the overall performance of a
small bank that is not an intermediate small bank warrants a rating of
outstanding, the agency carrying out the evaluation considers the
extent to which the bank exceeds the performance standards for a rating
of ``satisfactory'' and its performance in making qualified investments
and providing branches and other services and delivery systems that
enhance credit availability in its assessment area(s).\52\ A small bank
may receive an overall rating of ``needs to improve'' or ``substantial
noncompliance'' depending on the degree to which its performance has
failed to meet the standards for a ``satisfactory'' rating.\53\
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    \51\ 12 CFR part 25, Appendix A, paragraph (d)(1)(ii), part 195,
Appendix A, paragraph (d)(1)(ii), part 345, Appendix A, paragraph
(d)(1)(ii).
    \52\ 12 CFR part 25, Appendix A, paragraph (d)(3)(ii)(B), part
195, Appendix A, paragraph (d)(3)(ii)(B), part 345, Appendix A,
paragraph (d)(3)(ii)(B).
    \53\ 12 CFR part 25, Appendix A, paragraph (d)(3)(iii), part
195, Appendix A, paragraph (d)(3)(iii), part 345, Appendix A,
paragraph (d)(3)(iii).
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    Under the proposal, small banks would not be evaluated pursuant to
the general performance standards that consider a bank's CRA evaluation
measure and the retail lending distribution tests. Instead, small banks
would continue to be evaluated according to the small bank performance
standards applicable to small banks that are not intermediate small
banks in the current CRA regulations, unless they are evaluated under
an approved strategic plan or
[[Page 1224]]
elect to opt into the general performance standards. Performance
context and discriminatory and other illegal credit practices would
continue to be considered in evaluating a small bank's performance. In
addition, under the proposed framework, small banks would continue to
refer to relevant guidance in the Interagency Questions & Answers and
existing policies and procedures, including with respect to state and
MMSA ratings. As proposed, a small bank may choose to exercise an opt
in to the proposed general performance standards and must do so at
least six months before the start of its next exam cycle. Once a small
bank opts in, it would be subject to the general performance standards
outlined in the proposed rule for its next CRA evaluation. A small bank
that has opted in may exercise a one-time opt out at the end of any CRA
evaluation following the opt in and must do so six months before the
start of its next exam cycle. Small banks that opt out would revert to
being evaluated according to the small bank performance standards
applicable to small banks that are not intermediate small banks in the
current CRA regulations, unless they are evaluated under an approved
strategic plan, until such time that they cease to be small banks based
on their assets size.
    The proposal would also revise the definition of a ``small bank.''
Under the current regulations, in 2019, a small bank is a bank that, as
of December 31 of either of the prior two calendar years, had assets of
less than $1.284 billion, and an intermediate small bank is a small
bank that had assets of at least $321 million as of December 31 of both
of the prior two calendar years and assets of less than $1.284 billion
as of December 31 of either of the prior two calendar years.\54\ These
thresholds are adjusted annually based on changes in the Consumer Price
Index for Urban Wage Earners and Clerical Workers (CPI-W).\55\
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    \54\ 12 CFR 25.12(u)(1), 195.12(u)(1), 345.12(u)(1).
    \55\ 12 CFR 25.12(u)(2), 195.12(u)(2), 345.12(u)(2).
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    Under the proposal, a small bank would be a bank that had assets of
$500 million or less in each of the previous four calendar quarters.
Like the current asset-size thresholds, the $500 million threshold
would be adjusted annually based on changes in the CPI-W. Unlike the
current CRA regulations, the proposal would not include a separate
category for intermediate small banks.
    Although the proposed small bank performance standards would not
include a CD test and small banks would not be required to engage in CD
activities, lending-related activities, including CD loans, and CD
investments and services may be considered as described above. The
proposal would replace references to ``qualified investments'' in the
applicable small bank provisions of the current CRA regulations with
references to ``community development investments.'' The proposal's
definitions of qualifying loans and CD services also would apply to
small banks. Small banks that engage in qualifying activities as
described under proposed 12 CFR 25.04 and 345.04 would receive
consideration for those activities to the extent that they were
consistent with the small bank performance standards and appendix A.
The agencies also recognize that because the small bank performance
standards would be applied consistent with the current regulatory
framework, certain activities that do not meet the qualifying
activities criteria in Sec. Sec.  25.04 and 345.04 would receive
positive consideration. In addition to the revised qualifying
activities criteria, small banks also would be subject to the
proposal's changes to the assessment area delineation requirements and
would be required to delineate deposit-based assessment areas to the
same extent as other banks.
    The proposed small bank asset-size threshold and the lower burdens
imposed by the small bank performance standards recognize that
complying with the data collection, recordkeeping, and reporting
requirements under the new general performance standards may impose a
disproportionate burden on these banks. The agencies note, however,
that the available data indicates that small banks may outperform
larger banks if they were subject to the general performance standards.
    Summary of objectives. Taken together, the proposed changes to how
a bank's CRA activity is evaluated would reduce the subjectivity and
inconsistencies in the current framework. The two components of the
proposal's CRA evaluation under the new general performance standards--
the CRA evaluation measure and the retail lending distribution test--
would work together to encourage banks to engage in a variety of
activities that provide credit to LMI individuals, small business,
small farms, and in areas of need, as well as to incentivize long-term
investments in these communities. The retail lending distribution tests
would help ensure that banks' retail loans are appropriately
distributed to areas and people in need of credit in the local areas
where banks have a concentration of depositors or in the areas
surrounding bank branches. And the CRA evaluation measure's focus on
the value of on-balance sheet loans and investments would encourage
stable commitments to communities and disincentivize churning of
activities that may not provide long-term stability.
    The proposed combined objective method for measuring CRA
performance and activity in conjunction with the establishment of
transparent benchmarks and thresholds would reduce inconsistency and
subjectivity in the current CRA framework and could incentivize more
CRA activity. For example, by selecting sufficiently high empirical
benchmarks for the average CRA evaluation measure--informed by
historical performance levels--under the new general performance
standards, the agencies could encourage more qualifying activities. The
CD lending and investment minimums would recognize the importance of CD
activities to serving a community's needs. Similarly, the small bank
performance standards would continue to ensure that small banks'
lending and lending-related activities are responsive to the needs of
their communities. Furthermore, by preserving a role for performance
context, the agencies would continue to consider the specific facts and
circumstances that affect a bank's CRA capacity and opportunities and
account for them through the consistent and transparent exercise of
judgment.
    In addition, the proposal would account for differences in bank
size, location, and business model in several ways. As an initial
matter, small banks would continue to be evaluated pursuant to
performance standards designed specifically for small banks that
consider their lending opportunities and business model. For banks that
are not evaluated as small banks, the retail lending distribution test
component of the general performance standards would account for bank
size, location, and business model in two ways while assessing whether
a bank is adequately serving the LMI individuals and areas in its
assessment area. First, the retail lending geographic distribution test
and borrower distribution test would look at a bank's geographic and
borrower distributions of retail lending activities in LMI areas and to
LMI individuals, small farms, or small businesses in its assessment
areas, as applicable. For each type of retail activity, the
distribution test would look at a bank's qualifying activities
conducted as a percentage of a bank's lending in that area and,
accordingly, would be scaled
[[Page 1225]]
automatically to a bank's presence in that market, its location, and
its chosen business model. Second, a bank's retail lending geographic
distribution and borrower distribution would be evaluated based on its
best performance under either a demographic or peer comparator, both of
which would incorporate information about a bank's location. This
flexibility and focus on the distribution of the number of qualifying
retail loans would help to ensure that the retail lending distribution
test accounts for bank size, location, and business model. The CRA
evaluation measures also would account for differences in bank size,
location, and business model because these differences would be
reflected in the volume of a bank's retail domestic deposits at the
bank level and in each assessment area.
    Alternatives considered. The agencies also considered other
approaches to evaluating CRA performance for banks other than small
banks. The agencies first considered having a performance test that
would have been based solely on the total dollar volume of spending on
qualifying activities. Specifically, this approach would have relied
solely on a calculation that compares a bank's average CRA evaluation
measure--calculated by dividing its yearly qualifying activities value
by its average retail domestic deposits--to empirical benchmarks to
evaluate a bank's CRA performance, without overlaying a retail lending
distribution test. This method would have clarified how banks' CRA
performance is evaluated and provided additional consistency that would
have enabled banks to predict and track their performance throughout
the review period. Further, this method of evaluating CRA performance
could have directly achieved more CRA spending and investment in
communities that need it most. However, this approach would not have
accounted for a bank's distribution of the number of retail loans,
which is currently an important part of evaluating a bank's CRA
performance. In addition, without limits on the credit received for a
single transaction, this method of evaluating CRA performance could
have encouraged banks to meet their CRA obligations through a small
number of large dollar retail or CD activities.
    Second, the agencies considered retaining a separate CD and retail
lending test. For the CD test, the agencies considered establishing
empirical benchmarks for assessing performance related to a bank's on-
balance sheet dollar volume of CD activities as compared to the dollar
value of its retail domestic deposits. A bank's performance on the
retail lending test would have been based on its performance on
geographic and borrower distribution tests in each assessment area for
all major retail lending product lines. The agencies would have
developed thresholds, corresponding to statutory rating categories, for
a bank's performance on the retail lending distribution tests and the
bank would have been required to meet the thresholds for all tests for
each major retail lending product line to achieve the corresponding
rating. This method of evaluating a bank's CRA performance would also
have provided certainty and clarity and enabled a bank to monitor its
performance throughout its review period. However, this method would
not have focused on increasing the overall dollar volume of qualifying
activities in the areas that need it most and would not have helped
address CRA deserts and hotspots. Accordingly, to ensure that the
distribution of the number of CRA retail loans and the total volume of
spending on qualifying activities would be captured and assessed, the
proposed rule would provide that the ratings for a bank evaluated under
the general performance standards would be based on both the
distribution of retail loans and impact, measured in dollars, of the
bank's qualifying activities.
    Further, while developing this proposal, the agencies considered
several possible definitions of retail domestic deposits to determine
which definition would best reflect a bank's capacity to engage in
qualifying activities. First, the agencies considered using total
domestic deposits, as reported on Schedule RC, item 13.a, of the Call
Report, which is the definition of deposits currently used in the FDIC
Summary of Deposits report. This definition includes deposits from
individuals, partnerships, and corporations, the U.S. government,
states and political subdivisions in the United States, commercial
banks and other depository institutions in the United States, banks in
foreign countries, foreign governments, and official institutions,
including foreign central banks. After considering this definition, the
agencies determined that it could overestimate a bank's capacity to
engage in qualifying activities by including municipal deposits and
deposits from foreign governments and entities.
    The agencies also considered using the sum of total deposits
intended primarily for personal, household, or family use, as reported
on Schedule RC-E, items 6.a, 6.b, 7.a(1), and 7.b(1). This could more
accurately reflect a bank's capacity to engage in qualifying activities
for individuals, small businesses, and small farms; however, currently,
only institutions over $1 billion in total assets that offer one or
more consumer deposit account products are required to report that
information. Accordingly, the agencies did not use this definition in
the proposal because using it would have created additional reporting
requirements for banks not currently required to report this
information. In addition, the agencies considered scaling the empirical
benchmarks for the average CRA evaluation measure at the assessment
area level but determined that by relying on the volume of a bank's
retail domestic deposits in each assessment area, the measure already
accounts for differences in bank size, location, and business model.
    The agencies also considered developing a method for evaluating a
bank's use of alternative delivery systems and mechanisms, such as
mobile banking, for meeting the needs of LMI customers. For example,
the agencies considered adding a performance standard that accounts for
a bank's use of alternative delivery systems that serve LMI
individuals, such as the number of a bank's LMI customers that used an
alternative delivery system divided by the number of the bank's LMI
customers.
    The agencies invite comment on all aspects of the proposal related
to the proposed method and process for objectively measuring bank CRA
performance, including with respect to the following questions:
    14. The proposed rule would define retail domestic deposits as
total domestic deposits of individuals, partnerships, and corporations,
as reported on Schedule RC-E, item 1, of the Call Report, excluding
brokered deposits. Is there another definition--including the
alternatives described above--that would better reflect a bank's
capacity to engage in CRA qualifying activities?
    15. The proposal focuses on quantifying qualifying activities that
benefit LMI individuals and areas and quantifies a bank's distribution
of branches by increasing a bank's quantified value of qualifying
activities divided by retail domestic deposits (a bank's CRA evaluation
measure), expressed as a percentage, by up to one percentage point
based on the percent of a bank's branches that are in specified areas
of need. Banks with no branches in these areas will not receive any CRA
credit for their branch distribution under this method, even if
[[Page 1226]]
there are very few specified areas of need in the areas they serve.
Does this appropriately incentivize banks to place or retain branches
in specified areas of need, including LMI areas? Does it appropriately
account for the value of branches in these areas?
    16. Under the retail lending distribution tests, the proposal would
consider the borrower distribution of any consumer loan product line
that is a major retail lending product line for the bank. The agencies
defined a major retail lending product line as a retail lending product
line that comprises at least 15 percent of the bank-level dollar volume
of total retail loan originations during the evaluation period, but
also considered setting the threshold between 10 and 30 percent. Should
the agencies consider a different threshold? Additionally, applying the
retail lending distribution test to only major retail lending product
lines means that not all retail lending product lines will be evaluated
for every bank. Are there any circumstances in which applying the
retail lending distribution test to a consumer lending product line
should be mandatory, even if it is not a major retail lending product
line (e.g., if the consumer lending product line constitutes the
majority of a bank's retail lending in number of originations)?
Additionally, the proposal would only apply the retail lending
distribution tests in assessment areas with at least 20 loans from a
major product line. Is 20 loans the appropriate threshold, or should a
different threshold, such as 50 loans, be used?
    17. Under the proposal, a bank evaluated under the general
performance standards could not receive a satisfactory or an
outstanding presumptive bank-level rating unless it also received that
rating in a significant portion of its assessment areas and in those
assessment areas where it holds a significant amount of deposit. Should
50 percent be the threshold used to determine ``significant portion of
a bank's assessment area'' and ``significant amount of deposits'' for
purposes of determining whether a bank has received a rating in a
significant portion of its assessment areas? Or should another
threshold, such as 80 percent, be used?
    18. Under the proposal, banks that had assets of $500 million or
less in each of the previous four calendar quarters would be considered
small banks and evaluated under the small bank performance standards,
unless these banks opted into being evaluated under the general
performance standards. Is $500 million the appropriate threshold for
these banks? If not, what is the appropriate threshold? Should the
threshold be $1 billion instead?
    19. Under the proposal, small banks (i.e., banks with $500 million
or less in assets in each of the previous four calendar quarters) may
choose to exercise an opt into and a one-time opt out of the general
performance standards. Should small banks that opt in to the general
performance standards be permitted to opt out and be examined under the
small bank performance standards for future evaluations and, if so, how
frequently should this be permitted?
D. Data Collection, Recordkeeping and Reporting
    The current CRA framework requires banks to collect and report a
variety of data on loans.\56\ However, small banks, as defined under
the current rule, generally are exempt from these requirements.\57\ The
current framework also does not collect data on all CRA activity. For
example, the agencies do not currently collect data on CD investments
or CD services. Deposit data that are otherwise available also have
limitations because banks currently record deposits in locations other
than the address of the account holder. While CRA performance
evaluations may provide information on CRA activities that is not
otherwise collected, that information is not reported in an accessible
manner.
---------------------------------------------------------------------------
    \56\ 12 CFR 25.42, 195.42, 345.42.
    \57\ Id.
---------------------------------------------------------------------------
    The proposed framework includes data collection, recordkeeping, and
reporting requirements that would apply to banks. There would be
separate data collection and reporting requirements for banks subject
to the general performance standards and for banks subject to the small
bank performance standards.
    Banks evaluated under the general performance standards. Banks
evaluated under the general performance standards would be required to
collect and maintain their retail lending distribution tests results,
CRA evaluation measures calculations, and presumptive ratings
determinations. They would be required to collect and maintain data for
each qualifying loan or CD investment on-balance sheet and CD services
and monetary and in-kind donations that the bank provides until the
completion of its next evaluation. For each qualifying activity, among
other things, a bank would collect and maintain records of the dollar
value of the activity, the activity location, how the activity
satisfies the qualifying activities criteria, and whether it serves a
particular assessment area. For each qualifying loan and investment, a
bank would collect and maintain records of the dollar value of the
activity as of the close of business on the last day of each month that
the loan or investment is on-balance sheet, or, in the case of a
monetary or in-kind donation, its quantified value; a unique
identification number or symbol; and the type of loan or investment. In
addition, for qualifying loans, a bank would need to collect and
maintain the date of origination or purchase; the date of sale, if sold
by the bank within 90 days of origination; an indicator of whether the
loan was originated or purchased; the loan amount at origination or
purchase; and the income or revenue of the borrower. For each
qualifying investment, a bank would need to collect and maintain the
date of the investment. A bank would also collect and maintain records
of descriptions of each qualifying CD service and the date on which
each CD service was performed. The value of each retail domestic
deposit account and the physical address of each depositor at the end
of each quarter also would be collected and maintained. Banks also
would be required to collect and maintain certification from each
relevant party in those situations where the bank is substantively
conducting qualifying activities, but the activity is nominally done by
another party, such as an affiliate.
    To implement the retail lending distribution tests, banks would be
required to collect and maintain records of the number of all
qualifying and non-qualifying retail loans at the census-tract level
and report at the county or county equivalent level. Banks also would
be required to collect and maintain information on home mortgage and
consumer loans originations that do not qualify for CRA credit. For
each of those loans, a bank would be required to collect and maintain a
unique identification number or symbol, the loan type, the date of
origination, the loan amount at origination, the loan location, and the
income of the borrower.
    For each assessment area, a bank would be required to collect and
maintain a list of each county or county equivalent, metropolitan
division, nonmetropolitan area, metropolitan statistical area, and
state within the assessment area. Banks would also collect and maintain
information indicating whether each of its facilities is a depository
or non-depository facility.
[[Page 1227]]
    Banks would be required to collect and maintain records of
qualifying activities data at the bank level and for each assessment
area. The data collected and records maintained would include
information on all qualifying activities conducted by the bank.
    The proposal describes how banks would determine the location of an
activity. The location of retail loans would be the address of the
loan, determined by the borrower's physical address for consumer loans,
the address of the property that relates to a home mortgage loan, and
the address of the main business facility or farm or the physical
address where loan proceeds will be applied, as indicated by the
borrower, for business and farm loans. A CD loan, CD investment, and CD
service would be located in the census tract that includes a particular
project to the extent a bank can document that the services or funding
it provided was allocated to that particular project. If a bank cannot
document how the funding it provided was allocated, the services or
funding would be allocated across all of the bank's assessment areas
and other metropolitan and non-metropolitan statistical areas served by
the loan or investment according to the share of the bank's retail
domestic deposits in those areas. For example, if a CD investment
served an assessment area with four percent of the bank's deposits and
three other metropolitan statistical areas in which the bank did not
have an assessment area but did have two percent of its total deposits
in each, 40 percent of the dollar value would be allocated to the
assessment area and the other 60 percent would be considered in the
bank-level calculation.
    The proposal would require banks to collect and maintain all
necessary data in machine readable form. To facilitate compliance with
the data collection and recordkeeping requirements, the agencies would
provide additional guidance on the specific data points that a bank
would need to collect and maintain and the way the data would be
recorded. The agencies would review a sample of a bank's collected data
that was used to determine the presumptive rating as part of a bank's
CRA evaluation. The agencies would also use this information to
measure, assess, and understand bank CRA performance across the
industry.
    Annually, banks would report their retail lending distribution
tests results, CRA evaluation measures calculations, and presumptive
ratings determinations to the agencies. Banks would also provide the
annual quantified value of the following activities as of the close of
business on the last day of each month: (1) Qualifying retail loans;
(2) CD loans; (3) CD investments; and (4) CD services. Banks also would
be required to report annually (1) information on the number of home
mortgage loans, consumer loans, by product line, small loans to
businesses, and small loans to farms; (2) the average monthly value of
retail domestic deposits; and (3) assessment area information. For each
assessment area, a bank would be required to report a list of each
county or county equivalent, MD, nonmetropolitan area, MSA, and state
within the assessment area. Banks also would need to provide a
certification from each affiliate or other third party that the
qualifying activity information collected from that affiliate or other
third party is true and correct and report performance context
information. To reduce data collection, recordkeeping, and reporting
burdens, the proposal leverages the retail domestic deposit figure
reported quarterly on the Call Report for use in calculating the CRA
evaluation measure, although banks would be required to subtract
brokered deposits from that figure. The proposed rule would also
reference a form, available on the agencies' websites, that banks could
use to meet the reporting requirements to promote consistency and
reduce compliance burdens.
    Summary of objectives. While the agencies understand that the
proposed data collection, recordkeeping, and reporting requirements
would require upfront changes that will result in increased costs,
particularly for smaller banks, the agencies believe that, over time,
the benefits to transparency, simplicity, and consistency would
outweigh those one-time, upfront costs. The agencies believe that the
vast majority of data collection, recordkeeping, and reporting costs
would decrease over time through the development and implementation of
automated systems. The availability of third-party service providers
that provide data-related services across many banks could help banks
meet these new requirements and, because third-party service providers
may be able to achieve economies of scale, could further reduce costs
for smaller banks.
    Certain data that the proposal would require is not currently
collected or reported, but most of the information is available
currently or could be obtained without undue cost going forward. The
agencies believe that the benefits banks would realize from the
proposal, such as certainty regarding which activities would qualify
for CRA credit and where, would offset some, if not most, of the costs
of the proposal. Moreover, banks may find that the proposed
requirements provide non-CRA business benefits by, for example,
providing further insights into the location and potential needs of
their customers.
    Banks evaluated under the small bank performance standards. Banks
evaluated under the small bank performance standards would generally be
exempt from the data collection, recordkeeping, and reporting
requirements of this proposal. However, these banks would be required
to collect and maintain information on retail domestic deposits, based
on the physical address of the depositor.
    Public disclosures. The agencies would make certain information
that banks provide publicly available, allowing stakeholders to detect
trends and monitor and compare banks' CRA activities. This standardized
data would allow for informed public input. In addition, the agencies
would publish each bank's ratings and a list of banks rated
``outstanding.'' A bank receiving an outstanding rating would also
receive a certificate or seal to be displayed and to inform the public
of its CRA performance. Moreover, banks that receive a bank-level
outstanding CRA rating would be subject to a five-year CRA evaluation
period unless the data reported indicates that an earlier evaluation is
warranted. The agencies invite comment on other ways to incentivize
banks to achieve an outstanding rating.
    The proposal would also retain many of the current regulation's
provisions related to the public file,\58\ planned examination
schedules,\59\ public notice by banks,\60\ and the CRA notice.\61\
Banks would still need to provide public notice to the communities they
serve that community members are entitled to CRA-related information.
Banks would also need to provide the requested CRA-related information
to the community members. CRA-related information would still include
information about banks' branches, locations, and services, comments
received from the public related to assessment area needs and
opportunities, and responses to those comments. However, banks would
not have to provide data reported through HMDA in the public file
because the proposal would collect home mortgage data directly instead
of relying on HMDA data.\62\ Additionally, recognizing
[[Page 1228]]
the advances in technology over the past couple of decades, banks would
no longer be limited to providing public notice or making available the
CRA information through physical means. Instead, banks would have the
option to provide public notice or make available CRA-related
information on their websites. If a community member who has requested
CRA-related information does not have access to the internet, banks
could offer to print out the information at that person's expense,
instead of copying the information from a physical file.
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    \58\ 12 CFR 25.43, 195.43, 345.43.
    \59\ 12 CFR 25.45, 195.45, 345.45.
    \60\ 12 CFR 25.44, 195.44, 345.44.
    \61\ 12 CFR part 25 Appendix B, part 195 Appendix B, part 345
Appendix B.
    \62\ HMDA data are still available to the public and can be
accessed here: https://www.consumerfinance.gov/data-research/hmda/historic-data/.
---------------------------------------------------------------------------
    CRA sunshine requirements. In addition to the proposed data
collection, recordkeeping, and reporting provisions contained in this
proposal, the agencies note that Congress required the agencies to
issue rules implementing the CRA Sunshine Requirements as part of the
Gramm-Leach-Bliley Act of 1999.\63\ The agencies' regulations define
and address written agreements between financial institutions and
nongovernmental entities or persons that are made in fulfillment of the
CRA, and require that those agreements be made available to the public
and the appropriate Federal banking agency.\64\ Further, the
regulations require parties to a covered agreement to file reports with
the appropriate Federal banking agency for the duration of the
agreement. The agencies emphasize the continued importance of complying
with those regulations to ensure public awareness of the terms and
conditions of covered agreements.
---------------------------------------------------------------------------
    \63\ See 12 U.S.C. 1831y; 12 CFR parts 35, 207, 346.
    \64\ See 12 CFR part 35.
---------------------------------------------------------------------------
    Alternatives considered. Under the proposal, small banks would be
required to collect and maintain information on depositors necessary
for the designation of deposit-based assessment areas. To limit the
recordkeeping burdens for small banks, the agencies are considering
alternatives for small bank data collection, including a full exemption
from any recordkeeping requirements. For example, the agencies could
exempt a small bank from any recordkeeping requirement associated with
the designation of deposit-based assessment areas--which is designed to
capture non-traditional business models of internet banks or other
banks that have one or a few physical locations but operate on a
national basis--if the bank demonstrates that it has a traditional
business model to the agencies' satisfaction.
    The agencies invite comment on all aspects of the proposal related
to the proposed data collection, reporting, and recordkeeping
requirements, including with respect to the following question:
    20. As discussed above, the proposal would require banks to collect
and report additional data to support the proposed rule. Although most
of this data is already collected and maintained in some form, some
additional data collection may be required. For example, banks may need
to gather additional data to determine whether existing on-balance
sheet loans and investments are qualifying activities. Are there
impediments to acquiring this data? If so, what are they?
    21. What burdens, if any, would be added by the proposed data
collection, recordkeeping, and reporting requirements?
    a. What system changes would be needed to implement these
requirements?
    b. What are the estimated costs of implementing these requirements?
    22. The proposal would require small banks to collect and maintain
certain deposit-based assessment area data. Are there other ways the
agencies can limit the recordkeeping burden associated with the
designation of deposit-based assessment areas, including other ways for
banks to differentiate between traditional and internet type business
models?
E. Effective Date and Compliance Dates
    The agencies propose that the effective date of the final rule
would be the first day of the first calendar quarter that begins at
least 60 days after the issuance of the final rule. However, to reduce
the compliance burden of the final rule, the proposed rule would
include a transition period through varying compliance dates after the
effective date to allow banks to revise their systems for collecting,
maintaining, and reporting data and to establish processes for
calculating their qualifying activities values and CRA evaluation
measures and determining their presumptive ratings. Specifically, the
proposed rule would provide a bank other than a small bank with (1) one
year after the rule's effective date to comply with the rule's
assessment area, data collection, and recordkeeping requirements and
(2) two years after the rule's effective date to comply with the rule's
reporting requirements. The proposed rule would provide small banks
with one year after the rule's effective date to comply with the rule's
assessment area and applicable data collection and recordkeeping
requirements. All banks would not comply with the applicable remaining
requirements of the rule--and thus would not be evaluated under the new
framework--until they complete their evaluation period that concludes
immediately after the reporting requirements compliance date in 12 CFR
25.01(c)(4)(i)(A)(2) and 345.01(c)(4)(i)(A)(2) of the proposed rule,
including any extensions approved by their relevant agencies.
    To reduce the burden on small banks, the proposed rule would
provide small banks that opt into the general performance standards
under proposed 12 CFR 25.09(b) and 345.09(b) as of the final rule's
effective date and banks that no longer meet the definition of a small
bank (1) two years after the rule's effective date or after the bank no
longer meets the definition of a small bank to comply with the rule's
assessment area, data collection, and recordkeeping requirements and
(2) three years after the rule's effective date or after the bank no
longer meets the definition of a small bank to comply with the rule's
reporting requirements. However, small banks that choose to opt into
the general performance standards under proposed Sec. Sec.  25.09(b)
and 345.09(b) after the effective date would receive (1) one year after
the bank opts in to comply with the rule's assessment area, data
collection, and recordkeeping requirements and (2) two years after the
bank opts in to comply with the rule's reporting requirements.
    The agencies invite comment on all aspects of the proposal related
to the proposed compliance date provisions, including on the proposed
transition periods and potential reduction of small bank burden.
V. Qualifying Activities Illustrative List
    This list is a non-exhaustive, illustrative list of examples of
activities that would or would not qualify under proposed Sec. Sec.
25.04 and 345.04. The list is intended to identify activities that
would or would not meet the criteria in the proposed rule. The proposed
rule contemplates that the agencies will add additional activities that
meet or do not meet the qualifying activities criteria consistent with
the process outlined in proposed 12 CFR 25.05 and 345.05.
[[Page 1229]]
------------------------------------------------------------------------
     Proposed qualifying
     regulatory criteria                      Description
------------------------------------------------------------------------
Sec.  Sec.   25.04(b) and      Retail loans. A home mortgage loan, small
 345.04(b).                     loan to a business, small loan to a
                                farm, or consumer loan is a qualifying
                                activity if it is:
Sec.  Sec.   25.04(b)(1) and   Provided to a:
 345.04(b)(1).
Sec.  Sec.   25.04(b)(1)(i)    Low- or moderate-income individual or
 and 345(b)(1)(i).              family;
                               Loan classified on the bank's Call Report
                                as a 1-4 family residential construction
                                loan to an LMI individual.
                               Closed-end loan or open-end line of
                                credit classified on the bank's Call
                                Report as a loan secured by a 1-4 family
                                residential property to an LMI
                                individual.
                               Loan classified on the bank's Call Report
                                as secured by a multifamily residential
                                property to an LMI individual.
                               Home mortgage loan guaranteed by the
                                Federal Housing Administration (FHA) to
                                an LMI individual.
                               Home mortgage loan guaranteed under the
                                FHA's 203(b) Mortgage Insurance Program
                                to an LMI individual.
                               Home mortgage loan guaranteed under the
                                FHA's Limited 203(k) Program to an LMI
                                individual.
                               Home mortgage loan guaranteed under the
                                U.S. Department of Housing and Urban
                                Development's (HUD) Indian Home Loan
                                Guarantee Program (Section 184) to an
                                LMI individual.
                               Home mortgage loan guaranteed by the U.S.
                                Department of Agriculture's (USDA) Rural
                                Housing Service to an LMI individual.
                               Home mortgage guaranteed by the U.S.
                                Department of Veterans Affairs (VA) to
                                an LMI individual.
                               Credit card to an LMI individual.
                               Low-cost education loan to an LMI
                                individual, such as to fund school
                                tuition and/or expenses.
                               Home equity line of credit to an LMI
                                individual, such as for home
                                improvement.
                               Non-credit card revolving credit line,
                                such as for purchase of home appliances,
                                to an LMI individual.
                               Consumer loan to an LMI individual for
                                purposes other than purchasing an
                                automobile, such as to fund unexpected
                                medical expenses.
                               Automobile loan to an LMI individual to
                                purchase a car.
                               Installment loan to an LMI individual to
                                purchase home appliances.
Sec.  Sec.   25.04(b)(1)(ii)   Small business; or
 and 345(b)(1)(ii).
                               Loan or line of credit of $2 million or
                                less to a business with gross annual
                                revenues of $2 million or less when
                                classified on the bank's Call Report as
                                a commercial and industrial loan.
                               Loan or line of credit of $2 million or
                                less to a business with gross annual
                                revenues of $2 million or less when
                                classified on the bank's Call Report as
                                a loan secured by nonfarm nonresidential
                                properties.
                               Loan of $1.5 million under the U.S. Small
                                Business Administration (SBA) Certified
                                Development Company/504 Loan Program
                                that covers 50 percent of the project's
                                cost and is secured by a first lien on
                                real property.
                               Loan of $700 thousand to a business with
                                gross annual revenues of $2 million or
                                less to make improvements to its
                                manufacturing facility under the SBA
                                7(a) loan program.
                               Loan of $2 million to a business with
                                gross annual revenues of $2 million or
                                less to finance the purchase of
                                machinery under the USDA's Rural
                                Development Business and Industry
                                Guarantee Loan Program.
Sec.  Sec.   25.04(b)(1)(iii)  Small farm;
 and 345.04(b)(1)(iii).
                               Loan or line of credit of $2 million or
                                less to a farm with gross annual
                                revenues of $2 million or less when
                                classified on the bank's Call Report as
                                a loan to finance agricultural
                                production and other loans to farmers.
                               Loan or line of credit of $2 million or
                                less to a family farm with gross annual
                                revenues of $2 million or less when
                                classified on the bank's Call Report as
                                a loan to finance agricultural
                                production and other loans to farmers.
                               Loan of $800 thousand to a family farm
                                with gross annual revenues of $1.5
                                million to finance the purchase of
                                equipment.
Sec.  Sec.   25.04(b)(2) and   Located in Indian country;
 345.04(b)(2).
                               Loan or line of credit made in Indian
                                country and classified on the bank's
                                Call Report as a 1-4 family residential
                                construction loan.
                               Closed-end loan or open-end line of
                                credit made in Indian country and
                                classified on the bank's Call Report as
                                a loan secured by a 1-4 family
                                residential property.
                               Loan made in Indian country and
                                classified on the bank's Call Report as
                                secured by a multifamily residential
                                property.
                               Home mortgage loan made in Indian country
                                and guaranteed by the FHA.
                               Home mortgage loan made in Indian country
                                and guaranteed under the FHA's 203(b)
                                Mortgage Insurance Program.
                               Home mortgage loan made in Indian country
                                and guaranteed under the FHA's Limited
                                203(k) Program.
                               Home mortgage loan made in Indian country
                                and guaranteed under the HUD's Indian
                                Home Loan Guarantee Program (Section
                                184).
                               Home mortgage loan made in Indian country
                                and guaranteed by the USDA's Rural
                                Housing Service.
                               Home mortgage loan made in Indian country
                                and guaranteed by the VA.
                               Credit card to an individual in Indian
                                country.
                               Home equity line of credit extended in
                                Indian country, such as for home
                                improvement.
[[Page 1230]]

                               Non-credit card revolving credit line,
                                such as for purchase of home appliances,
                                to an individual in Indian country.
                               Consumer loan made to an individual in
                                Indian country for purposes other than
                                purchasing an automobile, such as to
                                fund unexpected medical expenses.
                               Automobile loan to an individual in
                                Indian country to purchase a car.
                               Loan or line of credit of $2 million or
                                less to a business in Indian country
                                with gross annual revenues of any amount
                                when classified on the bank's Call
                                Report as a commercial and industrial
                                loan.
                               Loan or line of credit of $2 million or
                                less to a business in Indian country
                                with gross annual revenues of any amount
                                when classified on the bank's Call
                                Report as a loan secured by nonfarm
                                nonresidential properties.
                               Loan or line of credit of $2 million made
                                in Indian country under the SBA
                                Certified Development Company/504 Loan
                                Program that covers 50 percent of the
                                project's cost and is secured by a first
                                lien on real property.
                               Loan or line of credit of $2 million to a
                                business in Indian country to make
                                improvements to its manufacturing
                                facility under the SBA 7(a) loan
                                program.
                               Loan or line of credit of $2 million to a
                                business in Indian country to finance
                                the purchase of machinery under the
                                USDA's Rural Development Business and
                                Industry Guarantee Loan Program.
                               Loan or line of credit of $2 million or
                                less to a farm in Indian country with
                                gross annual revenues of any amount when
                                classified on the bank's Call Report as
                                a loan to finance agricultural
                                production and other loans to farmers.
Sec.  Sec.   25.04(b)(3) and   A small loan to a business located in a
 345.04(b)(3).                  low- or moderate-income census tract; or
                               Loan of $100 thousand to a business with
                                gross annual revenues of $1.3 million to
                                purchase inventory for its business
                                located in a moderate-income census
                                tract.
                               Loan of $1.5 million to a business with
                                gross annual revenues of $10 million to
                                expand its manufacturing facility
                                located in a low-income census tract.
Sec.  Sec.   25.04(b)(4) and   A small loan to a farm located in a low-
 345.04(b)(4).                  or moderate-income census tract.
                               Loan of $250 thousand to purchase farm
                                equipment for a family farm with gross
                                annual revenues of $1.2 million located
                                in a low-income census tract.
                               Term loan of $2 million to refinance a
                                construction loan used to expand the
                                production facilities for a dairy farm
                                with gross annual revenues of $15
                                million located in a moderate-income
                                census tract.
Sec.  Sec.   25.04(c) and      Community development loans, community
 345.04(c).                     development investments, and community
                                development services. A community
                                development loan, community development
                                investment, or community development
                                service is a qualifying activity if it
                                provides financing for or supports:
Sec.  Sec.   25.04(c)(1) and   Affordable housing, which means:
 345.04(c)(1).
Sec.  Sec.   25.04(c)(1)(i)    Rental housing:
 and 345.04(c)(1)(i).
Sec.  Sec.                     That is likely to partially or primarily
 25.04(c)(1)(i)(A) and          benefit low- or moderate-income
 345.04(c)(1)(i)(A).            individuals or families as demonstrated
                                by median rents that do not and are not
                                projected at the time of the transaction
                                to exceed 30 percent of 80 percent of
                                the area median income;
                               A loan to a non-profit organization for
                                the purpose of providing affordable
                                housing to LMI individuals where the
                                median rents do not exceed 30 percent of
                                80 percent of the area median income.
                               A loan to a for-profit business for the
                                purpose of providing affordable housing
                                to LMI individuals where the median
                                rents do not exceed 30 percent of 80
                                percent of the area median income.
                               A loan to a for-profit developer for
                                construction of multi-family mixed-
                                income rental housing, that partially
                                benefits LMI individuals because 20
                                percent of the units will be offered at
                                median rents that do not exceed 30
                                percent of 80 percent of the area median
                                income.
                               A loan to a non-profit developer to build
                                multi-family rental housing guaranteed
                                under the USDA's Section 538 Guaranteed
                                Loan Program with all units offered at
                                median rents that do not exceed 30
                                percent of 80 percent of the area median
                                income.
                               Public welfare investment, under 12 CFR
                                part 24, that will use tax credits from
                                the Federal Historic Tax Credit Program
                                to finance the adaptive reuse and
                                renovation of a hotel into rental units
                                with median rents that will not exceed
                                30 percent of 80 percent of the area
                                median income.
                               A loan for a mixed-use property in an
                                underserved area that will be used to
                                help seasonal businesses provide
                                affordable housing to seasonal LMI
                                workers at rents that do not exceed 30
                                percent of 80 percent of the area median
                                income.
                               A loan to a for-profit developer for
                                construction of multi-family mixed-
                                income rental housing, with 60 percent
                                of the units offered at median rents
                                that do not exceed 30 percent of 80
                                percent of the area median income.
                               Public welfare investment, under 12 CFR
                                part 24, that will finance the company's
                                production of cost-effective modular
                                housing, which will be used to supply
                                affordable housing units for rent to LMI
                                individuals and families.
                               An investment that supports the abatement
                                of or remediation to correct lead-based
                                paint, asbestos, mold, or radon that are
                                present in a multi-family rental housing
                                project with rents not greater than 30
                                percent of 80 percent of the area
                                median.
Sec.  Sec.                     That partially or primarily benefits low-
 25.04(c)(1)(i)(B) and          or moderate-income individuals or
 345.04(c)(1)(i)(B).            families as demonstrated by an
                                affordable housing set-aside required by
                                a federal, state, local, or tribal
                                government;
                               Investment in a project where 30 percent
                                of the housing units will be set aside
                                as affordable to LMI individuals through
                                local inclusionary zoning.
[[Page 1231]]

                               Loan to purchase a multifamily dwelling
                                that will partially benefit LMI
                                individuals by designating at least 40
                                percent of the units to renters who
                                receive assistance under the U.S.
                                Department of Housing and Urban
                                Development's section 8 rental subsidy
                                program.
                               Public welfare investment, under 12 CFR
                                part 24, that provides financing for the
                                construction of a 102-unit rent-to-own
                                affordable housing complex targeted to
                                LMI individuals and families.
Sec.  Sec.                     That is undertaken in conjunction with an
 25.04(c)(1)(i)(C) and          explicit federal, state, local, or
 345.04(c)(1)(i)(C).            tribal government affordable housing
                                program for low- or moderate-income
                                individuals or families;
                               Investment in a limited partnership to
                                develop and operate a Federal Low-Income
                                Housing Tax Credit (LIHTC) multi-family
                                housing project.
                               Public welfare investment, under 12 CFR
                                part 24, to finance the conversion and
                                rehabilitation of public housing using
                                the HUD's Rental Assistance
                                Demonstration Program that uses a
                                section 8 project-based contract to make
                                the units affordable to LMI individuals
                                and families.
                               A loan to a nursing home and assisted
                                living facility that uses the HUD
                                Section 232 loan guarantee and is
                                defined by HUD as multifamily housing
                                that primarily serves or assists LMI
                                individuals or families.
                               An investment in a ``green'' retrofit
                                initiative as part of an explicit local
                                government program used to maintain the
                                affordability of rental housing for LMI
                                individuals through energy efficient
                                measures.
                               Loan to facilitate the purchase of
                                existing multifamily housing using a
                                guarantee provided under the HUD Section
                                207/223(f) program to make the units
                                affordable to LMI individuals and
                                families.
                               Loan to facilitate the substantial
                                rehabilitation of multifamily rental
                                housing for moderate-income families,
                                elderly and the handicapped using a
                                guarantee provided under the HUD Section
                                221(d)(4) mortgage insurance program to
                                make the units affordable to LMI
                                individuals and families.
                               Loan to a Native American tribe to
                                purchase land and construct
                                infrastructure and affordable rental
                                housing, as identified in the tribe's
                                Indian Housing Plan, using a guarantee
                                provided under the HUD Title VI Tribal
                                Housing Activities Loan Guarantee
                                Program to make the units affordable to
                                LMI individuals and families.
                               Loan to a non-profit sponsor to
                                rehabilitate multifamily rental housing
                                for elderly persons (62 or older) and/or
                                persons with disabilities using a
                                guarantee provided under the HUD Program
                                Section 231 to make the units affordable
                                to LMI individuals.
Sec.  Sec.                     That partially or primarily benefits
 25.04(c)(1)(i)(D) and          middle-income individuals or families in
 345.04(c)(1)(i)(D).            high-cost areas as demonstrated by an
                                affordable housing set-aside required by
                                a federal, state, local, or tribal
                                government; or
                               An investment in a project in a high-cost
                                area where 30 percent of the rental
                                units are set aside as affordable to
                                middle-income individuals through local
                                inclusionary zoning.
                               A loan to a non-profit to develop rental
                                housing under a state tax credit program
                                that supports workforce housing in high-
                                cost areas where 40 percent of the units
                                will be set-aside for middle-income
                                individuals and families.
Sec.  Sec.                     That is undertaken in conjunction with an
 25.04(c)(1)(i)(E) and          explicit federal, state, local, or
 345.04(c)(1)(i)(E).            tribal government affordable housing
                                program for middle-income individuals or
                                families in high-cost areas; or
                               A loan to finance temporary rental
                                housing for middle-income workers in a
                                high-cost area in response to a local
                                workforce housing program.
Sec.  Sec.   25.04(c)(1)(ii)   Owner-occupied housing purchased,
 and 345.04(c)(1)(ii).          refinanced, or improved by low- or
                                moderate-income individuals or families,
                                except for home mortgage loans provided
                                directly to individuals or families;
                               Investment in a mortgage-backed security
                                (MBS) that is primarily secured by loans
                                to LMI borrowers.
                               Bank employees help to build a single-
                                family home for a non-profit
                                organization with an express purpose of
                                providing affordable housing for
                                purchase by LMI individuals or families.
                               Down payment and closing cost assistance
                                grants on home purchase loans for LMI
                                borrowers.
Sec.  Sec.   25.04(c)(2) and   Another bank's community development
 345.04(c)(2).                  loan, community development investment,
                                or community development service;
                               Bank employees volunteer to provide
                                technical assistance to another bank to
                                establish a loan program targeted to LMI
                                individuals and families.
Sec.  Sec.   25.04(c)(3) and   Businesses or Farms that meet the size-
 345(c)(3).                     eligibility standards of the Small
                                Business Administration Certified
                                Development Company, as that term is
                                defined in 13 CFR 120.10, or the Small
                                Business Investment Company, as
                                described 13 CFR part 107, by providing
                                technical assistance and supportive
                                services, such as shared space,
                                technology, or administrative assistance
                                through an intermediary;
                               A grant to a non-profit that provides
                                technical assistance to small businesses
                                that meet the stated size-eligibility
                                standards.
                               Loan to a non-profit entity that provides
                                technical assistance to small businesses
                                that meet the size-eligibility standards
                                for an SBA Small Business Investment
                                Company.
                               Bank employees volunteer through a local
                                Chamber of Commerce to lead a workshop
                                that provides technical assistance to
                                the chamber's small business members
                                that meet the stated size-eligibility
                                standards.
                               Providing permanent office space rent-
                                free at a branch for use by the local
                                economic development organization that
                                targets small business development,
                                predominantly among start-up and micro-
                                businesses that meet the stated size-
                                eligibility standards.
[[Page 1232]]

Sec.  Sec.   25.04(c)(4) and   Community support services which means
 345.04(c)(4).                  activities, such as child care,
                                education, health services, and housing
                                services, that partially or primarily
                                serve or assist low- or moderate-income
                                individuals or families;
                               Public welfare investment, under 12 CFR
                                part 24, in a fund that provides
                                financing for a charter school that will
                                primarily serve LMI children.
                               Donation to a non-profit organization
                                that provides transportation to medical
                                treatments for LMI individuals.
                               Grant to a non-profit organization that
                                provides housing assistance and
                                counseling to LMI immigrants residing in
                                the United States.
                               Providing mentoring/tutoring services to
                                clients of a non-profit organization
                                that serves LMI youth.
                               Public welfare investment, under 12 CFR
                                part 24, that supports a non-profit that
                                provides general education degrees (GED)
                                primarily to LMI individuals without a
                                high school diploma.
                               Loan to a job training center that
                                primarily serves unemployed, LMI
                                individuals.
                               Volunteer service to serve meals at a
                                homeless shelter.
                               In-kind donation to a food pantry that
                                provides services to unemployed, LMI
                                families.
                               Loan to acquire a child care facility
                                that serves LMI residents of a low-
                                income neighborhood.
                               Volunteer service with a non-profit that
                                provides income tax assistance programs
                                for LMI individuals.
                               A grant to a non-profit organization that
                                runs a state-funded battered women's
                                shelter for LMI individuals in an
                                underserved area as part of a statewide
                                program.
                               A loan, investment, or service that
                                supports an LMI-focused alcohol and drug
                                recovery center.
                               Grant to a drug rehabilitation center
                                that primarily services low-income
                                individuals.
                               Loan to a legal assistance program for
                                LMI individuals.
                               Grant to an organization that provides
                                resume writing services to LMI formerly
                                incarcerated individuals.
                               Loan to an acute care hospital facility
                                using the HUD Section 242 Hospital
                                Mortgage Insurance Program to provide
                                affordable child care services for LMI
                                individuals or families.
                               Grant to support a program that provides
                                eye glasses to low-income individuals.
                               In-kind contribution of rent-free office
                                space to a local food bank.
                               Provision of technical assistance on
                                financial matters to a non-profit
                                organization that will apply for loans
                                or grants under the Federal Home Loan
                                Banks' (FHLBanks) Affordable Housing
                                Program, specifically by serving on a
                                loan review committee, assisting in
                                marketing financial services, and
                                furnishing financial services training
                                for staff and management.
Sec.  Sec.   25.04(c)(5) and   Essential community facilities that
 345(c)(5).                     partially or primarily benefit or serve:
Sec.  Sec.   25.04(c)(5)(i)    Low- or moderate-income individuals or
 and 345.04(c)(5)(i).           families; or
                               A construction loan to improve a hospital
                                that is located in a middle-income
                                census tract adjacent to a low-income
                                census tract that partially benefits LMI
                                individuals who will utilize hospital
                                services.
                               Investment in a municipal bond to fund
                                construction of a health center that
                                will primarily serve residents of a
                                moderate-income neighborhood.
                               Purchase of a local municipal bond, the
                                proceeds of which will be used to
                                construct a new high school that will
                                partially serve students from LMI
                                families.
                               Public welfare investment, under 12 CFR
                                part 24, in a fund that finances
                                supportive housing projects for the
                                chronically homeless and other public
                                funding, such as state-issued tax-exempt
                                bonds, HUD's Supportive Housing Program
                                or section 8 Project-Based Rental
                                Assistance, the FHLBanks' Affordable
                                Housing Program, and LIHTCs.
Sec.  Sec.   25.04(c)(5)(ii)   Low- or moderate-income census tracts,
 and 345.04(c)(5)(ii).          distressed areas, underserved areas,
                                disaster areas consistent with a
                                disaster recovery plan, or Indian
                                country;
                               Loan to construct a new fire station
                                located in Indian country.
                               Loan of $8 million to a company to build
                                a health clinic in an underserved area,
                                using the USDA's Community Facilities
                                Guarantee Loan Program.
                               Loan to build a police station in a
                                distressed area.
                               Purchase of a local municipal bond with a
                                purpose consistent with a local disaster
                                recovery plan, the proceeds of which
                                will be used to construct a new high
                                school in a disaster area.
                               Loan to improve a hospital in a
                                distressed area that serves the entire
                                community, including LMI individuals.
                               Investment in a fund that finances
                                community facilities in Indian country.
Sec.  Sec.   25.04(c)(6) and   Essential infrastructure that benefits or
 345.04(c)(6).                  serves:
Sec.  Sec.   25.04(c)(6)(i)    Low- or moderate-income individuals or
 and 345.04(c)(6)(i).           families; or
                               Loan to finance construction of a road in
                                a rural community that provides LMI
                                residents of the area access to
                                employment centers outside of the area.
                               Investment in a local cooperative to
                                develop broadband infrastructure and
                                expand access to LMI residents in the
                                area.
                               Investment in a local municipal bond to
                                improve city-wide water and waste water
                                systems with benefit to all residents,
                                including LMI residents.
                               Loan for infrastructure improvements,
                                including upgrading roads, water supply
                                and sewer services, to a mobile home
                                park that primarily rents space to LMI
                                residents.
Sec.  Sec.   25.04(c)(6)(ii)   Low- or moderate-income census tracts,
 and 345.04(c)(6)(ii).          distressed areas, underserved areas,
                                disaster areas consistent with a
                                disaster recovery plan, or Indian
                                country;
                               Public welfare investment, under 12 CFR
                                part 24, that will finance construction
                                of a solar energy facility that uses
                                federal renewable energy tax credits and
                                will provide access to reduced cost
                                electrical utilities to LMI census
                                tracts.
[[Page 1233]]

                               Investment in a local municipal bond to
                                refurbish a bridge that connects a low-
                                income neighborhood with essential
                                services without which residents would
                                otherwise not have access to those
                                services.
                               Investment in a state issued bond to
                                reconstruct a tunnel in a disaster area,
                                consistent with the area's disaster
                                recovery plan.
                               Purchase of a local municipal bond, the
                                proceeds of which will be used to
                                upgrade a water pipeline that serves an
                                underserved area.
                               Loan to a company to build a new flood
                                control system as identified in the
                                community's disaster recovery plan, such
                                as a levee or storm drain that serves
                                the disaster area.
                               Public welfare investment, under 12 CFR
                                part 24, to finance the construction of
                                a broadband network to develop reliable
                                internet access in an LMI census tract.
                               Investment in a Special City Taxing
                                District Bond with the purpose of
                                renovating city sidewalks in a
                                distressed area to comply with the
                                Americans with Disabilities Act.
Sec.  Sec.   25.04(c)(7) and   A family farm's:
 345.04(c)(7).
Sec.  Sec.   25.04(c)(7)(i)    Purchase or lease of farm land,
 and 345.04(c)(7)(i).           equipment, and other farm-related
                                inputs;
                               Loan to a family-owned corn and wheat
                                farm with gross annual revenues of $10
                                million to purchase a tractor.
                               Loan to a family-owned peanut farm with
                                gross annual revenues of $255 thousand
                                to purchase additional land to increase
                                production.
                               Loan to a family-owned vineyard with
                                gross annual revenues of $4 million to
                                purchase additional acreage.
Sec.  Sec.   25.04(c)(7)(ii)   Receipt of technical assistance and
 and 345.04(c)(7)(ii).          supportive services, such as shared
                                space, technology, or administrative
                                assistance through an intermediary; or
                               Grant to a non-profit organization that
                                provides technical assistance to family
                                farms.
Sec.  Sec.   25.04(c)(7)(iii)  Sale and trade of family farm products;
 and 345.04(c)(7)(iii).
                               Loan to a family-owned vegetable (misc.
                                crop) farm with gross annual revenues of
                                $500 thousand to construct a building
                                from which to sell produce.
                               Loan to a family-owned aquaculture farm
                                with gross annual revenues of $3 million
                                to market and sell their products
                                statewide.
Sec.  Sec.   25.04(c)(8) and   Federal, state, local, or tribal
 345.04(c)(8).                  government programs, projects, or
                                initiatives that:
Sec.  Sec.   25.04(c)(8)(i)    Partially or primarily benefit low- or
 and 345.04(c)(8)(i).           moderate-income individuals or families;
                               Grant to a non-profit organization to
                                provide a local government sponsored
                                dress for success program for homeless
                                women.
                               A loan to a non-profit organization to
                                provide a state government sponsored
                                after-school program for students from
                                LMI families.
Sec.  Sec.   25.04(c)(8)(ii)   Partially or primarily benefit small
 and 345.04(c)(8)(ii).          businesses or small farms as those terms
                                are defined in the programs, projects or
                                initiatives; or
                               Volunteer service providing guidance to
                                small businesses on how to create
                                financial statements under a state
                                program to support statewide business
                                development.
                               Investment in a SBA Guaranteed Loan Pool
                                Certificate.
                               Loan to a small business that is a state-
                                certified Historically Underutilized
                                Business.
                               Loan to a small business to purchase real
                                estate related to a New Markets Tax
                                Credit project, as provided for in 26
                                U.S.C. 45D.
                               Grant to a non-profit that provides
                                financing for small farms under a
                                federal program to encourage new farm
                                development.
                               Loan to a small business incubator that
                                primarily benefits small businesses by
                                providing supportive services to
                                business start-ups and that is funded in
                                part under a state-wide CD initiative.
                               Loan of $3 million to a small business
                                under a tribal government loan guarantee
                                program.
Sec.  Sec.   25.04(c)(8)(iii)  Are consistent with a bona fide
 and 345.04(c)(8)(iii).         government revitalization,
                                stabilization, or recovery plan for a
                                low- or moderate-income census tract; a
                                distressed area; an underserved area; a
                                disaster area; or Indian country;
                               Grant to a non-profit organization that
                                receives funds from a statewide program
                                to revitalize communities in Indian
                                country.
                               Contribution of other real estate owned
                                (OREO) property to a local government-
                                owned land bank whose primary purpose is
                                consistent with a government
                                revitalization plan that benefits LMI
                                census tracts.
                               Financing to support cleanup of
                                industrial brownfields in a distressed
                                area as part of city-sponsored
                                revitalization program.
                               Investment in a Tax Increment Financing
                                (TIF) bond to finance infrastructure
                                improvements consistent with a
                                government revitalization plan in a
                                distressed area.
                               Loan through a state program to a company
                                to purchase and replace equipment as
                                well as rebuild the manufacturing
                                facility that was damaged by flooding in
                                a federally designated disaster area and
                                supported by the community's disaster
                                recovery plan.
Sec.  Sec.   25.04(c)(9) and   Financial literacy programs or education
 345.04(c)(9).                  or homebuyer counseling;
                               Financial counseling by bank employees to
                                participants in a workforce development
                                program.
                               Bank employees conduct first-time
                                homebuyer counseling program for bank
                                customers.
                               Bank employees teach financial education
                                or literacy curricula at local community
                                centers.
                               Bank employees delivering the FDIC's
                                Money Smart Program curriculum to
                                residents at a senior living facility.
                               Grant to a non-profit organization that
                                provides financial literacy courses for
                                a foreclosure prevention program.
                               Activities supporting ``train the
                                trainer'' programs that are designed to
                                train teachers to provide financial
                                literacy education to their students.
[[Page 1234]]

                               In-kind donation of computer equipment to
                                a non-profit that conducts personal
                                money management courses for LMI
                                individuals.
                               Bank employees provide financial
                                education in connection with a school
                                savings program.
                               Loan to a non-profit credit counseling
                                organization that conducts personal
                                money management courses.
                               Donation to an organization that conducts
                                elder financial abuse and identity theft
                                prevention programs.
                               An in-kind donation of computer equipment
                                to a non-profit that provides financial
                                literacy courses.
                               Bank employees assist in the preparation
                                of tax filings under the Internal
                                Revenue Service's Volunteer Income Tax
                                Assistance Program.
                               Providing homebuyer education to
                                potential buyers of single-family
                                housing developed under a state program
                                for middle-income individuals and
                                families in high-cost areas.
                               Volunteer service to open savings
                                accounts offered through a school-based
                                banking program to students of a K-12
                                school that is located in and serves
                                residents of an LMI census tract.
Sec.  Sec.   25.04(c)(10) and  Owner-occupied and rental housing
 345.04(c)(10).                 development, construction,
                                rehabilitation, improvement, or
                                maintenance in Indian country;
                               Loan to develop housing in Indian Country
                                that is guaranteed under HUD's Title VI
                                Loan Guarantee Program.
                               Loan to construct mixed-income housing
                                under a tribal-government sponsored
                                program, 30% of which will be set aside
                                for middle-income teachers in Indian
                                country.
                               Loan to a for-profit developer to
                                construct rental housing in Indian
                                country.
Sec.  Sec.   25.04(c)(11) and  Qualified opportunity funds, as defined
 345.04(c)(11).                 in 26 U.S.C. 1400Z-2(d)(1), that benefit
                                low- or moderate-income qualified
                                opportunity zones, as defined in 26
                                U.S.C. 1400Z-1(a);
                               Investment in a qualified opportunity
                                fund, established to finance
                                construction of a new manufacturing
                                facility in an opportunity zone that is
                                also an LMI census tract.
                               Investment in a qualified opportunity
                                fund, established to finance renovation
                                of a vacant building into a cultural
                                arts facility, including loft space for
                                artists and a community theater, in an
                                opportunity zone that is also an LMI
                                census tract.
                               Investment in a qualified opportunity
                                fund, established to finance the
                                rehabilitation of an acute care hospital
                                facility, including the purchase of new
                                medical equipment, in an opportunity
                                zone that is also an LMI census tract.
                               Investment in a qualified opportunity
                                fund, established to finance
                                improvements to an athletic stadium in
                                an opportunity zone that is also an LMI
                                census tract.
Sec.  Sec.   25.04(c)(12) and  A Small Business Administration Certified
 345.04(c)(12).                 Development Company, as that term is
                                defined in 13 CFR 120.10, a Small
                                Business Investment Company, as
                                described in 13 CFR part 107, a New
                                Markets Venture Capital company, as
                                described in 13 CFR part 108, a
                                qualified Community Development Entity,
                                as defined in 26 CFR 45D(c), or a U.S.
                                Department of Agriculture Rural Business
                                Investment Company, as defined in 7 CFR
                                4290.50; or
                               An investment in a New Markets Venture
                                Capital company that finances businesses
                                that meet the SBA's size standards used
                                to define small business concerns.
                               Public welfare investment, under 12 CFR
                                part 24, to a qualified Community
                                Development Entity that will provide
                                financing for a food market to build a
                                180,000 square foot refrigerated
                                warehouse and food distribution
                                facility.
                               An investment in a SBA Small Business
                                Investment Company fund to finance
                                businesses that meet the SBIC size
                                standards.
                               An investment in a USDA Rural Business
                                Investment Company to fund businesses
                                and farms that meet the RBIC size
                                standards.
                               An investment in a New Markets Tax Credit-
                                eligible Community Development Entity to
                                fund a mixed-use project that will
                                include affordable housing for LMI
                                individuals and families and retail
                                space for small businesses.
Sec.  Sec.   25.04(c)(13) and  Ventures undertaken, including capital
 345.04(c)(13).                 investments and loan participations, by
                                a bank in cooperation with a minority
                                depository institution, women's
                                depository institution, Community
                                Development Financial Institution, or
                                low-income credit union, if the activity
                                helps to meet the credit needs of local
                                communities in which such institutions
                                are chartered, including activities that
                                indirectly help to meet community credit
                                needs by promoting the sustainability
                                and profitability of those institutions
                                and credit unions.
                               Bank employee time spent facilitating a
                                loan participation with a minority
                                depository institution, which will help
                                the minority depository institution to
                                meet the credit needs of its local
                                community.
                               Bank employees provide training to CDFI
                                staff on underwriting small farm loans
                                to help the CDFI expand its product
                                offerings to its community.
                               Bank provides in-kind services in the
                                form of free or discounted data
                                processing systems that aids a minority
                                depository institution in serving its
                                customers.
                               Bank donates branch space on a rent-free
                                basis to a low-income credit union to
                                better serve the credit union's
                                customers.
                               Bank certificate of deposit in a minority
                                depository institution.
                               Loan to enable a minority- or women-owned
                                depository institution or low-income
                                credit union, or CDFI to partner with
                                schools or universities to offer
                                financial literacy education to members
                                of its local communities in which such
                                institutions are chartered.
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[[Page 1235]]
VI. Regulatory Analysis
Regulatory Flexibility Act
    In accordance with section 3(a) of the Regulatory Flexibility Act,
5 U.S.C. 601 et seq. (RFA), the agencies are publishing an initial
regulatory flexibility analysis for the proposed rule. The RFA requires
an agency to provide an initial regulatory flexibility analysis with
the proposed rule or to certify that the proposed rule will not have a
significant economic impact on a substantial number of small entities.
The agencies are separately publishing initial regulatory flexibility
analyses for the proposal as set forth in this section. The agencies
welcome comment on all aspects of the initial regulatory flexibility
analyses. Final regulatory flexibility analyses will be conducted after
consideration of comments received during the public comment period.
OCC:
A. Reasons Why the Proposal Is Being Considered by the Agencies;
Statement of the Objectives of the Proposal; and Legal Basis for
Proposal
    The legal basis for the proposed rule is the CRA, 12 U.S.C. 2901 et
seq., which charges the Federal banking agencies to encourage the
institutions they supervise to help meet the credit needs of their
local communities in a manner that is safe and sound. As discussed in
the Supplementary Information section above, the agencies are proposing
to revise their regulations implementing the CRA to (1) clarify and
expand the types of activities that qualify for CRA credit; (2) update
and expand the areas in which qualifying activities receive credit; (3)
provide a more objective and transparent method to measure and evaluate
CRA performance; and (4) revise data collection, recordkeeping, and
reporting requirements to improve consistency.
B. Small Entities Affected by the Proposal
    Small Business Administration regulations define ``small
entities,'' for banking purposes, as entities with total assets of $600
million or less.\65\ The OCC currently supervises approximately 782
small entities. The proposal would affect approximately 749 of those
entities.
---------------------------------------------------------------------------
    \65\ See 13 CFR 121.201 (Sector 52, Subsector 522).
---------------------------------------------------------------------------
C. Projected Reporting, Recordkeeping, and Other Compliance
Requirements of Proposal
    The proposed rule sets forth new qualifying activities criteria,
assessment area delineation requirements, general performance
standards, and data collection, recordkeeping, and recording
requirements. The proposal would exempt banks with assets of $500
million or less in each of the prior four quarters (small banks) from
the general performance standards. These banks would be required to
comply with the current CRA small bank performance standards, new
qualifying activities criteria, new assessment area delineations, and
new data collection and recordkeeping requirements related to deposits.
The proposal would permit these small banks to opt in to the general
performance standards, which would require them to comply with all of
the new data collection, recordkeeping, and reporting requirements.
    To determine if the proposed rule would have a significant economic
impact on small entities, the OCC compared the estimated annual cost
with annual noninterest expense and annual salaries and employee
benefits for each small entity. If the estimated annual cost was
greater than 2.5 percent of total noninterest expense or five percent
of annual salaries and employee benefits, the OCC classified the impact
as significant. Based on these thresholds, the OCC concluded for
purposes of this initial regulatory flexibility analysis that the
proposed rule would result in a significant economic impact on a
substantial number of small entities. Specifically, if all of the small
banks that the proposal would exempt operated under the small bank
performance standards, then the proposal would have a significant
economic impact of approximately $36 million on 72 small entities,
which is a substantial number of small entities. If all of the small
banks the proposal would exempt opted in to the general performance
standards, then the proposal would have a significant economic impact
of approximately $375 million on 738 small entities, which is a
substantial number of small entities.
D. Identification of Duplicative, Overlapping, or Conflicting Federal
Rules
    The OCC believes that no Federal rules duplicate, overlap, or
conflict with the proposed rule.
E. Discussion of Significant Alternatives to Proposal
    The agencies have sought to incorporate flexibility into the
proposed rule and lessen burden and complexity for smaller banking
entities wherever possible, consistent with safety and soundness and
other applicable laws. In particular, as noted above, the proposal
would allow small banks to operate under the current CRA small bank
performance standards and would require compliance with only the new
qualifying activities criteria, assessment area delineation
requirements, and data collection and recordkeeping requirements
related to deposits. The new assessment area delineation requirements
may not increase the compliance burden as banks may be able to
demonstrate that more than 50 percent of their retail domestic deposits
fall within their facility-based assessment area(s). Also, the data
collection and recordkeeping requirements related to deposits would be
limited to data that small banks, for the most part, already collect
and maintain.
    For the small banking entities that have assets between $500 and
$600 million and small banks that opt in to the general performance
standards, the proposal would reduce the compliance burden of the final
rule by including a transition period with different compliance dates
based on asset size after the effective date. This transition period
would allow for banks to revise their systems for data collection,
maintenance, and reporting and to set up processes for calculating
their CRA evaluation measures and determining their presumptive
ratings.
    The agencies request comment on potential options for simplifying
the rule and reducing burden for small banks, including whether the
threshold for the small bank exemption should be set at $500 million
and whether the transition period is sufficient time for establishing
the necessary systems of operation.
FDIC:
    The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a proposed rule, an agency prepare and make available
for public comment an initial regulatory flexibility analysis
describing the impact of the proposal on small entities.\66\ A
regulatory flexibility analysis is not required, however, if the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. The Small Business
Administration (SBA) has defined ``small entities'' to include banking
organizations with total assets less than or equal to $600 million.\67\
Generally, the FDIC considers
[[Page 1236]]
a significant effect to be a quantified effect in excess of 5 percent
of total annual salaries and benefits per institution, or 2.5 percent
of total non-interest expenses. The FDIC believes that effects in
excess of these thresholds typically represent significant effects for
FDIC-insured institutions. Some expected effects of the proposed rule
are difficult to assess or accurately quantify with currently available
information, nevertheless the FDIC believes that the proposed rule will
have a significant economic impact on a substantial number of small
entities and has included an Initial Regulatory Flexibility Act
Analysis in this section.
---------------------------------------------------------------------------
    \66\ 5 U.S.C. 601 et seq.
    \67\ The SBA defines a small banking organization as having $600
million or less in assets, where an organization's ``assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See 13 CFR 121.201
(as amended by 84 FR 34261, effective August 19, 2019). In its
determination, the ``SBA counts the receipts, employees, or other
measure of size of the concern whose size is at issue and all of its
domestic and foreign affiliates.'' See 13 CFR 121.103. Following
these regulations, the FDIC uses a covered entity's affiliated and
acquired assets, averaged over the preceding four quarters, to
determine whether the covered entity is ``small'' for the purposes
of RFA.
---------------------------------------------------------------------------
Reasons Why This Action Is Being Considered
    As discussed in Section I. of the Supplementary Information of this
proposed rule, over the past two decades, technology and the expansion
of interstate banking has transformed the financial services industry
and how banking services are delivered and consumed. These changes
affect all banks, regardless of size or location, and are most evident
in banks that have a limited physical presence or that rely heavily on
technology to deliver their products and services. As banking has
evolved, banks' communities are not solely identifiable by the areas
that surround their physical locations. The Federal banking agencies
have also gained a greater understanding of communities' needs for
lending and investment, such as the need for community development (CD)
investments and loans with maturities longer than the typical CRA
evaluation period. The current CRA regulatory framework has not kept
pace with the transformation of banking and has had the unintended
consequence of incentivizing banks to limit some of their CD loans to
the length of a CRA evaluation period. Additionally, recognizing the
need for modernization, the Federal banking agencies began the effort
to assess and update the CRA regulatory framework in 2018 by working
together on an Advance Notice of Proposed Rulemaking (ANPR). Generally,
commenters supported making amendments to the CRA in order to make it
less inconsistent, opaque, and complex.
Policy Objectives
    As previously discussed in Section I. of the Supplementary
Information of this proposed rule, in response to this feedback, the
agencies propose to strengthen the CRA regulatory framework to better
achieve the underlying statutory purpose of encouraging banks to help
serve their communities by making the framework more objective,
transparent, consistent, and easy to understand. To accomplish these
goals, the proposal would clarify which activities qualify for CRA
credit; update where activities count for CRA credit; create a more
transparent and objective method for measuring CRA performance; and
provide for more transparent, consistent, and timely CRA-related data
collection, recordkeeping, and reporting. Revisions that reflect these
objectives would provide clarity and visibility for all stakeholders on
how a bank's CRA performance is evaluated and the level of CRA
activities banks conduct. These changes also would encourage banks to
serve their entire communities, including LMI neighborhoods, more
effectively through a broader range of CRA activities.
Legal Basis
    The FDIC is issuing this proposed rule under the authorities
granted to it under the Community Reinvestment Act of 1977. For a more
extensive discussion on the legal basis of the proposed rule, please
refer to Section I. of the Supplementary Information of this proposed
rule.
Description of the Rule
    The proposal would (1) establish clear criteria for the type of
activities that qualify for CRA credit, which generally would include
activities that currently qualify for CRA credit and other activities
that are consistent with the purpose of CRA, but may not qualify under
the current CRA framework; (2) require the agencies to publish
periodically a non-exhaustive, illustrative list of examples of
qualifying activities; and (3) establish a straightforward and
transparent process for stakeholders to seek agency confirmation that
an activity is a qualifying activity.\68\ In addition to providing
transparency, the proposed qualifying activities criteria would expand
the types of activities that qualify for CRA credit to recognize that
some banks are currently serving community needs in a manner that is
consistent with the statutory purpose of CRA but are not receiving CRA
credit for those activities. The proposal would expand where CRA
activity counts to help banks meet the needs of their entire
communities, including LMI neighborhoods. To ensure that CRA activity
continues to have a local community focus where banks maintain a
physical presence and conduct a substantial portion of their lending
activity, banks would continue to be required to delineate assessment
areas around their main office, branches, or non-branch deposit-taking
facilities as well as the surrounding areas where banks have originated
or purchased a substantial portion of their loans. These areas would be
identified as ``facility-based'' assessment areas. In addition, to
recognize the evolution of modern banking (including the emergence of
internet banks) and in conformity with the CRA's intent to ensure that
banks help meet credit needs where they collect deposits,\69\ the
proposed rule would require banks to delineate additional, non-
overlapping ``deposit-based'' assessment areas where they have
significant concentrations of retail domestic deposits (regardless of
physical presence).
---------------------------------------------------------------------------
    \68\ The agencies are proposing to retain for certain banks the
small bank performance standards applicable to small banks that are
not intermediate small banks in the current regulations. 12 CFR
25.26; 12 CFR 195.26; and 12 CFR 345.26. The agencies intend for
these standards to be applied consistent with their treatment under
the current regulation except as discussed below.
    \69\ See, e.g., 123 Cong. Rec. 17630 (1977) (statement of Sen.
William Proxmire, Chairman, S. Comm. on Banking, Housing, and Urban
Affairs).
---------------------------------------------------------------------------
    Consistent with the current CRA framework, the proposed rule would
include different performance standards applicable to banks of
different sizes. Small banks, as defined under the proposed rule, would
continue to be evaluated under the small bank performance standards
currently applicable to small banks that are not intermediate small
banks.\70\ The proposed rule also would establish new general
performance standards to evaluate other banks' CRA activities and the
CRA activities of small banks that opt into these standards. The
general performance standards would assess two fundamental components
of a bank's CRA performance: (1) The appropriate distribution (i.e.,
number) of qualifying retail loans to LMI individuals, small farms,
small businesses, and LMI geographies in a community through the
application of tests evaluating a bank's distribution of retail
lending; and (2) the impact of a bank's qualifying activities, measured
[[Page 1237]]
by a bank's CRA evaluation measure, which includes the quantified value
\71\ of a bank's qualifying activities divided by a bank's retail
domestic deposits plus a measure of branch distribution in specified
areas of need.
---------------------------------------------------------------------------
    \70\ The proposed rule would define a small bank as a bank that
had assets of $500 million or less in each of the previous four
calendar quarters.
    \71\ The quantified value is the dollar value of the qualifying
activity multiplied by applicable multipliers and percentages of
partial benefit to the intended population or area. The specific
quantified value for the different types of qualifying activities is
discussed later in the preamble and explained in the regulation.
---------------------------------------------------------------------------
    For a more extensive description of the proposed rule, please refer
to Section II. of the Supplementary Information of this proposed rule.
Small Entities Affected
    The FDIC supervises 3,424 depository institutions, of which 2,665
are defined as small institutions by the terms of the RFA.\72\ The
proposed rule would affect all FDIC-supervised institutions, therefore
the FDIC estimates that the proposed rule would affect 2,665 small,
FDIC-supervised institutions. Of the 2,665 small, FDIC-supervised
institutions, 2,526 currently report total consolidated assets of less
than $500 million. Therefore, the FDIC estimates that 2,526 small,
FDIC-supervised institutions would be subject to the small bank
performance standards of the proposed rule. Additionally, the FDIC
estimated that 139 small, FDIC-supervised institutions would be subject
to the new general performance standards of the proposed rule. However,
because small, FDIC-supervised institutions with less than $500 million
in total consolidated assets have the option of adopting the new
general performance standards of the proposed rule, the number of
small, FDIC-supervised institutions who adopt the new general
performance standards might be greater than the estimated amount. It is
difficult to estimate this aspect of the proposed rule with the
information currently available to the FDIC, because such estimates
would depend on the present and future financial conditions,
activities, and management decision of affected institutions.
---------------------------------------------------------------------------
    \72\ Call Report, June 30, 2019. Nine insured domestic branches
of foreign banks are excluded from the count of FDIC-insured
depository institutions. These branches of foreign banks are not
``small entities'' for purposes of the RFA.
---------------------------------------------------------------------------
Expected Effects
    The new general performance standards for some small, FDIC-insured
institutions in the proposed rule is likely to benefit covered
institutions by establishing a more objective, clear, and consistent
metric by which a covered institution is evaluated. If the proposed
general performance standards are more stringent for some institutions
than the current parameters, the proposed rule could pose costs for
covered institutions by potentially reducing their CRA examination
rating. If the proposed general performance standards are less
stringent for some institutions than the current parameters, the
proposed rule could benefit covered institutions by potentially
increasing their CRA examination rating. It is difficult to accurately
quantify these aspects of the proposed rule with the information
currently available to the FDIC.
    The publicly available list of examples of qualifying activities
should benefit small, covered institutions and borrowers by
establishing a reference for qualifying activities. Additionally, the
proposed establishment of the list and an optional process through
which FDIC-insured institutions and interested third parties can seek
confirmation of a particular activity and have it added to the list,
will create additional compliance burden. However, the FDIC believes
that small, FDIC-insured institutions and interested third parties will
only incur such a burden if they believe that the benefits outweigh the
costs.
    Establishing a transparent methodology for calculating qualifying
activities values should benefit small, covered institutions by
enabling them to more effectively manage their CRA activities and
compliance. Additionally, to the extent that the qualifying activities
value calculation methodology overweighs some activities relative to
others, the proposed rule is likely to benefit certain activities and
may lead to changes in the distribution of qualifying activities by
some small, covered institutions.
    The proposed rule amends the calculation of qualified loans and CD
investments activities from the total balance just prior to a CRA
examination, to average month-end outstanding amount on a bank's
balance sheet. This aspect of the proposed rule is likely to
disincentivize the acquisition of qualifying activities that serve only
to boost the assessed activities for small, FDIC-supervised
institutions just prior to a CRA evaluation. This amendment to the
calculation of these qualified activities is likely to benefit
borrowers, as covered institutions seek to develop sustained efforts to
conduct qualifying activities.
    The proposed rule augments the current assessment area designation
methodology by adding areas where a bank has a significant portion of
its retail domestic deposits, outside of its facility-based assessment
areas. To the extent that small, covered institutions were already
conducting qualifying activities in these areas, this aspect of the
proposed rule will benefit small, covered institutions by crediting
this activity towards their CRA assessment. However, to the extent that
small, covered institutions were not already conducting qualifying
activities in these areas, this aspect of the proposed rule would pose
costs for covered institutions by compelling them to start conducting
qualifying activities in these areas or negatively affecting their CRA
assessment. It is difficult to accurately quantify these aspects of the
proposed rule with the information currently available to the FDIC.
Further, to the extent that small, covered institutions were not
already conducting qualifying activities in these areas, this aspect of
the proposed rule would benefit borrowers by incentivizing small,
covered institutions to focus on meeting their financial service needs.
    As discussed previously, the proposed rule maintains the small bank
performance standards, however the rule amends the definition of
``small bank'' from total consolidated assets less than $1.284 billion
to $500 million or less. Therefore, this aspect of the proposed rule
may increase compliance costs for the 139 intermediate-small banks,
FDIC-supervised institutions with total consolidated assets less than
$1.284 billion, but greater than $500 million. Additionally, banks that
will be subject to the small bank performance standards under the
proposed rule will utilize the revised definition of qualifying
activities and assessment areas. The expected effects of these aspects
of the proposed rule were previously addressed in this RFA section.
    As discussed previously, the proposed rule may increase compliance
costs for all small, FDIC-insured institutions. The FDIC estimates
that, if adopted, the recordkeeping, reporting, and disclosure burden
for small, FDIC-supervised institutions associated with the Community
Reinvestment Act would be 1,030 hours per year for entities subject to
the small bank performance standards, and 7,361 hours per year for
entities subject to the new general performance standards. Assuming
that each institution utilizes labor from Executives and Managers,
Lawyers, Compliance Officers, IT Specialists, Financial Analysts, and
Clerical Workers in fixed proportion, the FDIC estimates that the
complying with the CRA would pose $93,000 in annual costs for small,
FDIC-supervised entities subject to the small bank performance
standards, and $665,802.45
[[Page 1238]]
in annual costs for small, FDIC-supervised entities subject to the new
general performance standards. Additionally, the proposed rule
redefines loans to small business as loans with an origination balance
of $2 million or less, as opposed to the current threshold of $1
million or less. Small, FDIC-insured institutions might incur some
regulatory costs associated with making the necessary changes to their
systems in order to comply with the new definition.
Other Statutes and Federal Rules
    The FDIC has not identified any likely duplication, overlap, and/or
potential conflict between this proposed rule and any other federal
rule.
    The FDIC invites comments on all aspects of the supporting
information provided in this section, and in particular, whether the
proposed rule would have any significant effects on small entities that
the FDIC has not identified.
Paperwork Reduction Act of 1995
    Certain provisions of the proposed rule contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with
the requirements of the PRA, the agencies may not conduct or sponsor,
and a respondent is not required to respond to, an information
collection unless it displays a currently valid Office of Management
and Budget (OMB) control number.
    The agencies reviewed the proposed rule and determined that it
revises certain information collection requirements previously cleared
by OMB under OMB Control Nos. 1557-0160 and 3064-0092. The agencies
have submitted the revised information collection to OMB for review
under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section
1320.11 of the OMB's implementing regulations (5 CFR 1320).
Current Actions
    Under the proposed rule:
     Banks may request that the agency confirm that an activity
is a qualifying activity by submitting a complete Qualifying Activity
Confirmation Request Form. 12 CFR __.05(c)(1).
     A bank must delineate one or more assessment areas within
which the agency evaluates the bank's record of helping to meet the
credit needs of its community. 12 CFR __.08.
     Banks that are not small banks must submit information on
the Performance Context Form. 12 CFR __.14(c).
     A bank must submit a strategic plan if the bank: (1) Would
otherwise be evaluated under Sec.  __.12 and does not maintain retail
domestic deposits on-balance sheet or (2) is a small bank that does not
originate retail loans. A bank not required to submit a plan may do so.
12 CFR __.16.
     Banks evaluated under the general performance standards in
Sec.  __.12 and banks evaluated under a strategic plan under Sec.
__.16, unless otherwise determined in writing by the agency, must
collect and maintain the information required by 12 CFR __.19. 12 CFR
__.19.
     Small banks must collect and maintain data on the value of
each retail domestic deposit account and the physical address of each
depositor. 12 CFR __.20.
     Banks must keep the data collected under Sec.  __.19 and
Sec.  __.20 in machine readable form (as prescribed by the agency). 12
CFR __.22.
     Banks evaluated under the general performance standards in
Sec.  __.12 and banks evaluated under a strategic plan under Sec.
__.16, unless otherwise determined in writing by the agency, must
report the information required by 12 CFR __.23. 12 CFR __.23.
     Banks must maintain a public file that includes: All
written comments and responses; a copy of the public section of the
bank's or savings association's most recent CRA performance evaluation;
a list of the bank's branches, their street addresses, and census
tracts; a list of the branches opened or closed, their street
addresses, and geographies; a list of services offered; a map of each
assessment area; and any other information the bank chooses. Banks with
strategic plans must include a copy of the plan. Banks with less than
satisfactory ratings must include a description of their current
efforts to improve their performance in helping to meet the credit
needs of their entire community. Banks must make all of this
information available to the public. This information must be current
as of April 1 of each year. 12 CFR __.25.
OCC
    Title of Information Collection: Community Reinvestment Act.
    Frequency: On Occasion.
    Affected Public: Businesses or other for-profit.
    Estimated number of respondents: 1,069.
    Total estimated annual burden: 3,401,393 hours.
FDIC
    Title of Information Collection: Community Reinvestment Act.
    Frequency: On Occasion.
    Affected Public: Businesses or other for-profit.
    Estimated number of respondents: 3,390.
    Total estimated annual burden: 8,702,163 hours.
    Comments are invited on:
    a. Whether the collections of information are necessary for the
proper performance of the agencies' functions, including whether the
information has practical utility;
    b. The accuracy or the estimate of the burden of the information
collections, including the validity of the methodology and assumptions
used;
    c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
    d. Ways to minimize the burden of the information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
    e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on aspects
of this notice that may affect reporting, recordkeeping, or disclosure
requirements and burden estimates should be sent to the addresses
listed in the ADDRESSES section of this document. A copy of the
comments may also be submitted to the OMB desk officer by mail to U.S.
Office of Management and Budget, 725 17th Street NW, #10235,
Washington, DC 20503; facsimile to (202) 395-6974; or email to
[email protected], Attention, Federal Banking Agency Desk
Officer.
Unfunded Mandates Reform Act of 1995
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded
Mandates Act) (2 U.S.C. 1532) requires that the OCC prepare a budgetary
impact statement before promulgating a rule that includes any Federal
mandate that may result in the expenditure by State, local, and Tribal
governments, in the aggregate, or by the private sector, of $100
million or more (adjusted annually for inflation, currently $154
million) in any one year. If a budgetary impact statement is required,
section 205 of the Unfunded Mandates Act also requires the OCC to
identify and consider a reasonable number of regulatory alternatives
before promulgating a rule.
    The OCC has determined that this proposed rule is likely to result
in the expenditure by the private sector of $154 million or more.
Therefore, the OCC has prepared a budgetary impact
[[Page 1239]]
analysis and identified and considered alternative approaches. The full
text of the OCC's analyses under the Unfunded Mandates Act is available
at: http://www.regulations.gov, Docket ID OCC-2018-0008.
Riegle Community Development and Regulatory Improvement Act of 1994
    Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994 (RCDRIA), 12 U.S.C. 4802(a), in
determining the effective date and administrative compliance
requirements for new regulations that impose additional reporting,
disclosure, or other requirements on insured depository institutions,
the agencies must consider, consistent with principles of safety and
soundness and the public interest, any administrative burdens that such
regulations would place on depository institutions, including small
depository institutions, and customers of depository institutions, as
well as the benefits of such regulations. In addition, section 302(b)
of RCDRIA, 12 U.S.C. 4802(b), requires new regulations and amendments
to regulations that impose additional reporting, disclosures, or other
new requirements on insured depository institutions generally to take
effect on the first day of a calendar quarter that begins on or after
the date on which the regulations are published in final form. The OCC
invites comments that will inform its consideration of RCDRIA.
List of Subjects
12 CFR Part 25
    Community development, Credit, Investments, National banks,
Reporting and recordkeeping requirements.
12 CFR Part 195
    Banks, Banking, Community development, Credit, Investments,
Reporting and recordkeeping requirements.
12 CFR Part 345
    Banks, Banking, Community development, Credit, Investments,
Reporting and recordkeeping requirements.
DEPARTMENT OF THE TREASURY
OFFICE OF THE COMPTROLLER OF THE CURRENCY
12 CFR CHAPTER I
Authority and Issuance
    For the reasons discussed in the preamble, and under the authority
of 12 U.S.C. 93a, the Office of the Comptroller of the Currency
proposes to amend 12 CFR part 25 and remove part 195 as follows:
PART 25--COMMUNITY REINVESTMENT ACT AND INTERSTATE DEPOSIT
PRODUCTION REGULATIONS
0
1. The authority citation for part 25 continues to read as follows:
    Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215,
215a, 481, 1462a, 1463, 1464, 1814, 1816, 1828(c), 1835a, 2901
through 2908, 3101 through 3111, and 5412(b)(2)(B).
0
2. Revise subparts A through D to read as follows:
Subpart A--General
Sec.
25.01 Authority, purposes, and scope.
25.02 Effect of CRA performance on applications.
25.03 Definitions.
Subpart B--Qualifying Activities
25.04 Qualifying activities criteria.
25.05 Qualifying activities confirmation and illustrative list.
25.06 Qualifying activities quantification.
25.07 Qualifying activities value.
Subpart C--Assessment Area
25.08 Assessment area.
Subpart D--Performance Evaluations
25.09 Performance standards and ratings, in general.
25.10 CRA evaluation measure.
25.11 Retail lending distribution tests.
25.12 General performance standards and presumptive rating.
25.13 Small bank performance standards.
25.14 Consideration of performance context.
25.15 Discriminatory and other illegal credit practices.
25.16 Strategic plan.
25.17 Assigned ratings.
25.18 State/multistate metropolitan statistical area assigned
rating.
Subpart A--General
Sec.  25.01   Authority, purposes, and scope.
    (a) Authority. The authority for this part is 12 U.S.C. 21, 22, 26,
27, 30, 36, 93a, 161, 215, 215a, 481, 1462a, 1463, 1464, 1814, 1816,
1828(c), 1835a, 2901 through 2907, and 3101 through 3111.
    (b) Purposes. In enacting the Community Reinvestment Act (CRA),
Congress required each appropriate Federal financial supervisory agency
to assess an institution's record of meeting the credit needs of its
entire community, including low- and moderate-income communities,
consistent with the safe and sound operation of such institution, and
take that record into account in its evaluation of an application for a
deposit facility by such institution. This part is intended to carry
out the purposes of the CRA by:
    (1) Establishing the framework and criteria by which the Office of
the Comptroller of the Currency (OCC) assesses a bank's record of
helping to meet the credit needs of its entire community, including
low- and moderate-income communities, consistent with the safe and
sound operation of the bank; and
    (2) Providing that the OCC takes that record into account in
considering certain applications.
    (c) Scope--(1) General. This part applies to all banks as defined
in Sec.  25.03 except as provided in paragraphs (c)(2) and (c)(3) of
this section.
    (2) Federal branches and agencies--(i) This part applies to all
insured Federal branches and to any Federal branch that is uninsured
that results from an acquisition described in section 5(a)(8) of the
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
    (ii) Except as provided in paragraph (c)(2)(i) of this section,
this part does not apply to Federal branches that are uninsured,
limited Federal branches, or Federal agencies, as those terms are
defined in part 28 of this chapter.
    (3) Certain exempt banks. This part does not apply to banks that do
not perform commercial or retail banking services by granting credit or
offering credit-related products or services to the public in the
ordinary course of business, other than as incident to their
specialized operations and done on an accommodation basis. These banks
include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and banks
that engage only in one or more of the following activities: Providing
cash management controlled disbursement services or serving as
correspondent banks, trust companies, or clearing agents.
    (4) Compliance Dates--(i) Banks other than small banks--(A) Banks
that are not small banks must comply with the following requirements of
this part on the following dates:
    (1) One year after the effective date of the final rule for the
assessment area, data collection, and recordkeeping requirements in
Sec. Sec.  25.08, 25.19, and 25.22; and
    (2) Two years after the effective date of the final rule for the
reporting requirements in Sec.  25.23.
    (B) Banks that are not small banks must comply with the applicable
requirements of the other sections of this part after completing the
evaluation period that concludes immediately after the reporting
requirements compliance date in paragraph (c)(4)(i)(A)(2) of this
section, including any extensions approved by the OCC.
[[Page 1240]]
    (ii) Small banks--(A) Small banks must comply with the assessment
area, data collection, and recordkeeping requirements in Sec. Sec.
25.08, 25.20, and 25.22 one year after the effective date of this rule.
    (B) Small banks must comply with the applicable requirements of the
other sections of this part after completing the evaluation period that
concludes immediately after the compliance date in paragraph
(c)(4)(ii)(A) of this section, including any extensions approved by the
OCC.
    (iii) Small banks that opt into the general performance standards
in Sec.  25.12 as of the effective date of this rule and banks that no
longer meet the small bank definition--(A) Small banks that opt into
the general performance standards in Sec.  25.12 as of the effective
date of this rule pursuant to Sec.  25.09(b) and banks that no longer
meet the small bank definition must comply with the following
requirements on the following dates:
    (1) Two years after the effective date of the final rule for the
assessment area, data collection, and recordkeeping requirements in
Sec. Sec.  25.08, 25.19, and 25.22; and
    (2) Three years after the effective date of the final rule for the
reporting requirements in Sec.  25.23.
    (B) Those banks must comply with the applicable requirements of the
other sections of this part after completing the evaluation period that
concludes immediately after the reporting requirements compliance date
in paragraph (c)(4)(iii)(A)(2) of this section, including any
extensions approved by the OCC.
    (iv) Small banks that opt into the general performance standards in
Sec.  25.12 after the effective date of the final rule--(A) Small banks
that opt into the general performance standards in Sec.  25.12 after
the effective date of the final rule pursuant to Sec.  25.09(b) must
comply with the following requirements on the following dates:
    (1) One year after the bank opts in for the assessment area, data
collection, and recordkeeping requirements in Sec. Sec.  25.08, 25.19,
and 25.22; and
    (2) Two years after the bank opts in for the reporting requirements
in Sec.  25.23.
    (B) Those banks must comply with the applicable requirements of the
other sections of this part after completing the evaluation period that
concludes immediately after the reporting requirements compliance date
in paragraph (c)(4)(iv)(A)(2) of this section, including any extensions
approved by the OCC.
Sec.  25.02   Effect of CRA performance on applications.
    (a) CRA performance. Among other factors, the OCC takes into
account the record of performance under the CRA of each applicant bank
in considering an application for:
    (1) The establishment of a domestic branch or non-branch deposit
taking facility;
    (2) The relocation of the main office or a domestic branch;
    (3) Under the Bank Merger Act (12 U.S.C. 1828(c)), the merger or
consolidation with or the acquisition of assets or assumption of
liabilities of an insured depository institution;
    (4) The conversion of an insured depository institution to a
national bank charter;
    (5) A savings association charter; and
    (6) Acquisitions subject to section 10(e) of the Home Owners' Loan
Act (12 U.S.C. 1467a(e)).
    (b) Charter application. An applicant (other than an insured
depository institution) for a national bank or a Federal thrift charter
must submit with its application a description of how it will meet its
CRA objectives, if applicable. The OCC takes the description into
account in considering the application and may deny or condition
approval on that basis.
    (c) Interested parties. The OCC takes into account any views
expressed by interested parties that are submitted in accordance with
the OCC's procedures set forth in part 5 of this chapter in considering
CRA performance in an application listed in paragraphs (a) and (b) of
this section.
    (d) Denial or conditional approval of application. A bank's record
of performance may be the basis for denying or conditioning approval of
an application listed in paragraph (a) of this section.
    (e) Insured depository institution. For purposes of this section,
the term ``insured depository institution'' has the same meaning as
this term is given in 12 U.S.C. 1813.
Sec.  25.03   Definitions.
    For purposes of this part, the following definitions apply:
    Activity means a loan, investment, or service by a bank.
    Affiliate has the same meaning as this term is given in Regulation
W, 12 CFR 223.2(a) and (b), as of the effective date of this rule but
applies to member and non-member banks.
    Agencies means the OCC and the Federal Deposit Insurance
Corporation (FDIC).
    Area median income means:
    (1) The median family income for the metropolitan statistical area,
if a person or census tract is located in a metropolitan statistical
area, or for the metropolitan division, if a person or census tract is
located in a metropolitan statistical area that has been subdivided
into metropolitan divisions; or
    (2) The statewide nonmetropolitan median family income, if a person
or census tract is located outside a metropolitan statistical area.
    Assessment area means a geographic area delineated in accordance
with Sec.  25.08.
    Average means the statistical mean.
    Bank means a national bank (including a Federal branch as defined
in part 28 of this chapter) or a savings association, the deposits of
which are insured by the FDIC pursuant to Chapter 16 of Title 12, as
described in 12 U.S.C. 1813(c)(2), except as provided in Sec.
25.01(c)(3).
    Branch means a staffed banking facility authorized as a branch,
whether shared or unshared, including, for example, a mini-branch in a
grocery store or a branch operated in conjunction with any other local
business or non-profit organization. The term ``branch'' only includes
a ``domestic branch'' as that term is defined in section 3(o) of the
Federal Deposit Insurance Act (FDIA) (12 U.S.C. 1813(o)).
    Call Report means Consolidated Reports of Condition and Income as
filed under 12 U.S.C. 161.
    Community Development Financial Institution has the same meaning as
this term is given in 12 U.S.C. 4702(5).
    Community development investment means a lawful investment,
membership share, deposit, legally-binding commitment to invest that is
reported on the Call Report, Schedule RC-L, or monetary or in-kind
donation that meets the criteria of Sec.  25.04(c).
    Community development loan means a loan, line of credit, or
contingent commitment to lend that meets the criteria of Sec.
25.04(c).
    Community development services means bank employee time spent
volunteering as a representative of the bank on activities that meet
the criteria of Sec.  25.04(c) or supporting activities that meet the
criteria of Sec.  25.04(c)(2), (11). A bank employee may receive
expense reimbursement for volunteer time related to the community
development activity.
    Compensation means the Bureau of Labor Statistics calculation of
the hourly wage for that type of work engaged in by a bank employee in
the course of conducting community development services.
    Consumer loan means a loan reported on the Call Report, Schedule
RC-C,
[[Page 1241]]
Loans and Lease Financing Receivables, Part 1, Item 6, Loans to
individuals for household, family, and other personal expenditures,
which include the following product lines:
    (1) Credit card, which is an extension of credit to an individual
for household, family, and other personal expenditures arising from
credit cards;
    (2) Other revolving credit plan, which is an extension of credit to
an individual for household, family, and other personal expenditures
arising from prearranged overdraft plans and other revolving credit
plans not accessed by credit cards;
    (3) Automobile loan, which is a consumer loan extended for the
purpose of purchasing new and used passenger cars and other vehicles
such as minivans, vans, sport-utility vehicles, pickup trucks, and
similar light trucks for personal use; and
    (4) Other consumer loan, which is any other loan to an individual
for household, family, and other personal expenditures (other than
those that meet the definition of a ``loan secured by real estate'' and
other than those for purchasing or carrying securities), including low-
cost education loans, which is any private education loan, as defined
in section 140(a)(8) of the Truth in Lending Act (15 U.S.C. 1650(a)(8))
(including a loan under a state or local education loan program),
originated by the bank for a student at an ``institution of higher
education,'' as that term is generally defined in sections 101 and 102
of the Higher Education Act of 1965 (20 U.S.C. 1001 and 1002) and the
implementing regulations published by the U.S. Department of Education,
with interest rates and fees no greater than those of comparable
education loans offered directly by the U.S. Department of Education.
Such rates and fees are specified in section 455 of the Higher
Education Act of 1965 (20 U.S.C. 1087e).
    Contingent commitment to lend means a legally-binding commitment to
extend credit in instances where another bank initially funded, or
committed to fund, a project but cannot, for financial or legal
reasons, advance unanticipated additional funds necessary to complete
the project.
    Distressed area means a middle-income census tract identified by
the agencies that meets one or more of the following conditions:
    (1) An unemployment rate of at least 1.5 times the national
average,
    (2) A poverty rate of 20 percent or more, or
    (3) A population loss of 10 percent or more between the previous
and most recent decennial census or a net migration loss of five
percent or more over the five-year period preceding the most recent
census.
    Essential community facility means a public facility, including but
not limited to a school, library, park, hospital and health care
facility, and public safety facility.
    Essential infrastructure means:
    (1) Public infrastructure, including but not limited to public
roads, bridges, tunnels; and
    (2) Essential telecommunications infrastructure, mass transit,
water supply and distribution, utilities supply and distribution,
sewage treatment and collection, and industrial parks.
    Family farm has the same meaning as the term is given by the Farm
Service Agency of the U.S. Department of Agriculture in 7 CFR 761.2(b)
as of the effective date of this rule.
    Financing means permissible equity or debt facilities, such as
loans, lines of credit, bonds, private funds, securities, or other
permissible investments.
    High-cost area means any county in which the percentage of
households who have monthly housing costs greater than 30 percent of
their monthly income is greater than 40 percent.
    Home mortgage loan means a loan reported on the Call Report,
Schedule RC-C, Loans and Lease Financing Receivables, Part I,
specifically:
    (1) Item 1.a.(1) 1-4 family residential construction loans;
    (2) Item 1.c Loans secured by 1-4 family residential properties
(includes closed-end and open-end loans); or
    (3) Item 1.d Loans secured by multifamily (5 or more) residential
properties.
    Income levels are:
    (1) Low-income, which means an individual income that is less than
50 percent of the area median income, or a median family income that is
less than 50 percent in the case of a census tract.
    (2) Moderate-income, which means an individual income that is at
least 50 percent and less than 80 percent of the area median income, or
a median family income that is at least 50 percent and less than 80
percent in the case of a census tract.
    (3) Middle-income, which means an individual income that is at
least 80 percent and less than 120 percent of the area median income,
or a median family income that is at least 80 percent and less than 120
percent in the case of a census tract.
    (4) Upper-income, which means an individual income that is 120
percent or more of the area median income, or a median family income
that is 120 percent or more in the case of a census tract.
    Indian country has the same meaning as this term is given in 18
U.S.C. 1151.
    Low-income credit union has the same meaning as this term is given
in 12 CFR 701.34.
    Major retail lending product line means a bank's retail lending
product line that composes at least 15 percent of the bank-level dollar
volume of total retail loan originations during the evaluation period.
    Metropolitan division has the same meaning as this term is given by
the Director of the Office of Management and Budget.
    Metropolitan statistical area has the same meaning as this term is
given by the Director of the Office of Management and Budget.
    Military bank means a bank whose business predominately consists of
serving the needs of military personnel who serve or have served in the
armed forces (including the U.S. Army, Navy, Marine Corp., Air Force,
and Coast Guard) or dependents of military personnel. A bank whose
business predominantly consists of serving the needs of military
personnel or their dependents means a bank whose most important
customer group is military personnel or their dependents.
    Minority depository institution means a depository institution as
defined in 12 U.S.C. 2907(b)(1).
    Monetary or in-kind donation means:
    (1) A grant, monetary contribution, or monetary donation, or
    (2) A contribution of goods, commodities, or other non-monetary
resources.
    Non-branch deposit-taking facility means a banking facility other
than a branch owned or operated by, or operated exclusively for, the
bank that is authorized to take deposits that is located in any state
or territory of the United States of America.
    Nonmetropolitan area means any area that is not located in a
metropolitan statistical area.
    Partially benefits means 50 percent or less of the dollar value of
the activity or of the individuals or census tracts served by the
activity.
    Primarily benefits means:
    (1) Greater than 50 percent of the dollar value of the activity or
of the individuals or census tracts served by the activity; or
    (2) The express, bona fide intent, purpose, or mandate of the
activity as stated, for example, in a prospectus, loan proposal, or
community action plan.
    Qualifying activity means an activity that helps meet the credit
needs of a bank's entire community, including low- and moderate-income
individuals
[[Page 1242]]
and communities, in accordance with Sec.  25.04.
    Qualifying loan means a retail loan that meets the criteria in
Sec.  25.04(b) or a community development loan that meets the criteria
in Sec.  25.04(c).
    Retail domestic deposit means a ``deposit'' as defined in section
3(l) of the FDIA (12 U.S.C. 1813(l)) and as reported on Schedule RC-E,
item 1, of the Call Report that is held in the United States and is
provided by an individual, partnership, or corporation other than a
deposit that is obtained, directly or indirectly, from or through the
mediation or assistance of a deposit broker as that term is defined in
section 29 of the FDIA (12 U.S.C. 1831f(g)).
    Retail loan means a home mortgage loan, small loan to a business,
small loan to a farm, or consumer loan.
    Retail lending product line means a:
    (1) Home mortgage loan product line, which includes all home
mortgage loans;
    (2) Small loan to a business product line, which includes all small
loans to businesses;
    (3) Small loan to a farm product line, which includes all small
loans to farms; or
    (4) Consumer lending product line, which includes:
    (ii) An automobile loan product line;
    (iii) A credit card product line;
    (iv) An other revolving credit plan product line; or
    (v) An other consumer loan product line.
    Small bank--(1) Definition. Small bank means a bank that:
    (i) Had assets of $500 million or less in each of the previous four
calendar quarters; or
    (ii) Was a small bank as of the close of the calendar quarter
immediately preceding the close of the last calendar quarter and did
not have assets of greater than $500 million as of the close of each of
the past four calendar quarters.
    (2) Adjustment. The dollar figures in this definition shall be
adjusted annually and published by the OCC, based on the year-to-year
change in the average of the Consumer Price Index for Urban Wage
Earners and Clerical Workers, not seasonally adjusted, for each twelve-
month period ending in November, with rounding to the nearest $100,000.
    Small business means a business that has gross annual revenues of
no greater than $2 million. The OCC will annually adjust the $2 million
threshold for inflation, and the adjustment to the threshold will be
made publicly available.
    Small farm means a farm with gross annual revenues of no greater
than $2 million. The OCC will annually adjust the $2 million threshold
for inflation, and the adjustment to the threshold will be made
publicly available.
    Small loan to a business means a loan reported on the Call Report,
Schedule RC-C, Loans and Lease Financing Receivables, Part 1, Item 1.e,
Secured by nonfarm nonresidential properties, or Item 4, Commercial and
industrial loans, and of no greater than $2 million. The OCC will
annually adjust the $2 million threshold for inflation, and the
adjustment to the threshold will be made publicly available.
    Small loan to a farm means a loan reported on the Call Report,
Schedule RC-C, Loans and Lease Financing Receivables, Part 1, Item 1.b,
Secured by farmland, or Item 3, Loans to finance agricultural
production and other loans to farmers, and of no greater than $2
million. The OCC will annually adjust the $2 million threshold for
inflation, and the adjustment to the threshold will be made publicly
available.
    Underserved area means a middle-income census tract:
    (1) Identified by the agencies as meeting the criteria for
population size, density, and dispersion that indicate the area's
population is sufficiently small, thin, and distant from a population
center that the tract is likely to have difficulty financing the fixed
costs of meeting essential community needs. The agencies will use as
the basis for these designations the ``urban influence codes,''
numbered ``7,'' ``10,'' ``11,'' and ``12,'' maintained by the Economic
Research Service of the U.S. Department of Agriculture; or
    (2) Identified by the agencies as:
    (i) Not having a branch of any bank within:
    (A) 2 miles of the center of the census tract if it is an urban
census tract, as defined by the Federal Financial Institutions
Examination Council Census data;
    (B) 5 miles of the center of the census tract if it is a mixed
census tract, as defined by the Federal Financial Institutions
Examination Council Census data;
    (C) 10 miles of the center of the census tract if it is a rural
census tract, as defined by the Federal Financial Institutions
Examination Council Census data; or
    (D) 5 miles of the center of the census tract if the census tract
is an island area, as defined by the Federal Financial Institutions
Examination Council Census data; and
    (ii) Not having any branch within the census tract.
    Women's depository institution means a depository institution as
defined in 12 U.S.C. 2907(b)(2).
Subpart B--Qualifying Activities
Sec.  25.04  Qualifying activities criteria.
    (a) General. Retail loans, community development loans, community
development investments, and community development services that help
meet the credit needs of a bank's entire community, including low- and
moderate-income communities, are qualifying activities if they meet the
criteria in this section at the time the activity is originated, made,
or conducted. If the activity is subsequently purchased by another
bank, it is a qualifying activity if it meets the criteria in this
section at the time of purchase.
    (b) Retail loans. A home mortgage loan, small loan to a business,
small loan to a farm, or consumer loan is a qualifying activity if it
is:
    (1) Provided to a:
    (i) Low- or moderate-income individual or family;
    (ii) Small business; or
    (iii) Small farm;
    (2) Located in Indian country;
    (3) A small loan to a business located in a low- or moderate-income
census tract; or
    (4) A small loan to a farm located in a low- or moderate-income
census tract.
    (c) Community development loans, community development investments,
and community development services. A community development loan,
community development investment, or community development service is a
qualifying activity if it provides financing for or supports:
    (1) Affordable housing, which means:
    (i) Rental housing:
    (A) That is likely to partially or primarily benefit low- or
moderate-income individuals or families as demonstrated by median rents
that do not and are not projected at the time of the transaction to
exceed 30 percent of 80 percent of the area median income;
    (B) That partially or primarily benefits low- or moderate-income
individuals or families as demonstrated by an affordable housing set-
aside required by a federal, state, local, or tribal government;
    (C) That is undertaken in conjunction with an explicit federal,
state, local, or tribal government affordable housing program for low-
or moderate-income individuals or families;
    (D) That partially or primarily benefits middle-income individuals
or families in high-cost areas as demonstrated by an affordable housing
set-aside required by
[[Page 1243]]
a federal, state, local, or tribal government; or
    (E) That is undertaken in conjunction with an explicit federal,
state, local, or tribal government affordable housing program for
middle-income individuals or families in high-cost areas; or
    (ii) Owner-occupied housing purchased, refinanced, or improved by
low- or moderate-income individuals or families, except for home
mortgage loans provided directly to individuals or families;
    (2) Another bank's community development loan, community
development investment, or community development service;
    (3) Businesses or Farms that meet the size-eligibility standards of
the Small Business Administration Certified Development Company, as
that term is defined in 13 CFR 120.10, or the Small Business Investment
Company, as described in 13 CFR part 107, by providing technical
assistance and supportive services, such as shared space, technology,
or administrative assistance through an intermediary;
    (4) Community support services which means activities, such as
child care, education, health services, and housing services, that
partially or primarily serve or assist low- or moderate-income
individuals or families;
    (5) Essential community facilities that partially or primarily
benefit or serve:
    (i) Low- or moderate-income individuals or families; or
    (ii) Low- or moderate-income census tracts, distressed areas,
underserved areas, disaster areas consistent with a disaster recovery
plan, or Indian country;
    (6) Essential infrastructure that benefits or serves:
    (i) Low- or moderate-income individuals or families; or
    (ii) Low- or moderate-income census tracts, distressed areas,
underserved areas, disaster areas consistent with a disaster recovery
plan, or Indian country;
    (7) A family farm's:
    (i) Purchase or lease of farm land, equipment, and other farm-
related inputs;
    (ii) Receipt of technical assistance and supportive services, such
as shared space, technology, or administrative assistance through an
intermediary; or
    (iii) Sale and trade of family farm products;
    (8) Federal, state, local, or tribal government programs, projects,
or initiatives that:
    (i) Partially or primarily benefit low- or moderate-income
individuals or families;
    (ii) Partially or primarily benefit small businesses or small farms
as those terms are defined in the programs, projects or initiatives; or
    (iii) Are consistent with a bona fide government revitalization,
stabilization, or recovery plan for a low- or moderate-income census
tract; a distressed area; an underserved area; a disaster area; or
Indian country;
    (9) Financial literacy programs or education or homebuyer
counseling;
    (10) Owner-occupied and rental housing development, construction,
rehabilitation, improvement, or maintenance in Indian country;
    (11) Qualified opportunity funds, as defined in 26 U.S.C. 1400Z-
2(d)(1), that benefit low- or moderate-income qualified opportunity
zones, as defined in 26 U.S.C. 1400Z-1(a);
    (12) A Small Business Administration Certified Development Company,
as that term is defined in 13 CFR 120.10, a Small Business Investment
Company, as described in 13 CFR part 107, a New Markets Venture Capital
company, as described in 13 CFR part 108, a qualified Community
Development Entity, as defined in 26 CFR 45D(c), or a U.S. Department
of Agriculture Rural Business Investment Company, as defined in 7 CFR
4290.50; or
    (13) Ventures undertaken, including capital investments and loan
participations, by a bank in cooperation with a minority depository
institution, women's depository institution, Community Development
Financial Institution, or low-income credit union, if the activity
helps to meet the credit needs of local communities in which such
institutions are chartered, including activities that indirectly help
to meet community credit needs by promoting the sustainability and
profitability of those institutions and credit unions.
Sec.  25.05   Qualifying activities confirmation and illustrative list.
    (a) Qualifying activities list. The OCC maintains a publicly
available illustrative list at www.occ.gov of non-exhaustive examples
of qualifying activities that meet and activities that do not meet the
criteria in Sec.  25.04.
    (b) Confirmation of a qualifying activity. A bank may request that
the OCC confirm that an activity meets the criteria in Sec.  25.04 and
is a qualifying activity in accordance with paragraph (c) of this
section.
    (1) When the OCC confirms that an activity is consistent with the
criteria in Sec.  25.04, the OCC will notify the requestor and may add
this activity to the list of activities that meet the qualifying
activities criteria described in paragraph (a) of this section,
incorporating any conditions imposed, if applicable.
    (2) When the OCC determines that an activity is not consistent with
the criteria in Sec.  25.04, the OCC will notify the requestor and may
add this activity to the list of activities that do not meet the
qualifying activities criteria described in paragraph (a) of this
section.
    (c) Process--(1) A bank may request that the OCC confirm that an
activity is a qualifying activity by submitting a complete Qualifying
Activity Confirmation Request Form available on www.occ.gov.
    (2) In responding to a confirmation request that an activity is
consistent with the criteria in Sec.  25.04, the OCC will consider:
    (i) The information on the Qualifying Activity Confirmation Request
Form;
    (ii) Whether the activity is consistent with the safe and sound
operation of the bank; and
    (iii) Any other information the OCC deems relevant.
    (3) The OCC may impose conditions on its confirmation to ensure
that an activity is consistent with the criteria in Sec.  25.04.
    (4) An activity is confirmed as a qualifying activity if the bank
is not informed of an OCC objection within 6 months of submission of a
complete Qualifying Activity Confirmation Request Form.
    (d) Modifying the qualifying activities list. In addition to
updating the list in paragraph (a) of this section on an ongoing basis
in response to requests for confirmation described in paragraph (b) of
this section, the OCC will publish the qualifying activities list no
less frequently than every three years for notice and comment to
determine whether the list should change. If the OCC determines that a
qualifying loan or community development investment no longer meets the
criteria in Sec.  25.04, that loan or community development investment
will not be considered a qualifying activity for any subsequent
purchasers.
Sec.  25.06   Qualifying activities quantification.
    (a) Community development service quantification. The dollar value
of a community development service is the compensation for the
community development service multiplied by the number of hours the
employee spent performing the service, as adjusted by paragraph (e) of
this section.
    (b) In-kind donation quantification. The dollar value of an in-kind
donation is the fair market value of the donation,
[[Page 1244]]
as adjusted by paragraph (e) of this section.
    (c) Monetary donation quantification. The dollar value of a
monetary donation is the actual dollar value of the donation, as
adjusted by paragraph (e) of this section.
    (d) Qualifying loan and other community development investment
quantification. The dollar value of a qualifying loan or a community
development investment not included in paragraph (b) or (c) of this
section, is:
    (1) Except for qualifying loans in paragraph (d)(2) of this
section, the average of the dollar value, as of the close of business
on the last day of the month, for each month the loan or investment is
on-balance sheet, of:
    (i) The outstanding balance of a loan or investment, as adjusted by
paragraph (e) of this section;
    (ii) Any legally-binding commitment to invest, as adjusted by
paragraph (e) of this section; and
    (iii) The allowance for credit losses on off balance sheet credit
exposures for contingent commitments to lend, as calculated in
accordance with the instructions to the Call Report, Schedule RC-G, as
adjusted by paragraph (e) of this section; or
    (2) For qualifying retail loans sold within 90 days of origination,
25 percent of the aggregate dollar value of the loan at origination, as
adjusted by paragraph (e) of this section.
    (e) Portion of qualifying activities that partially benefit. The
dollar value of a qualifying activity that partially benefits, as
defined in Sec.  25.03, is calculated by multiplying the percentage of
the partial benefit by the full dollar value of the qualifying activity
quantified under paragraphs (a)-(d) of this section.
Sec.  25.07   Qualifying activities value.
    (a) Bank-level qualifying activities value. A bank evaluated under
Sec.  25.12 calculates its bank-level qualifying activities value
annually based on the dollar value of all qualifying activities
originated, made, purchased, or performed on behalf of the bank and not
included in the bank-level qualifying activities value of another bank
subject to this part or part 345. The qualifying activities value
equals the sum, during a given annual period, of:
    (1) The quantified dollar value of qualifying loans and community
development investments, as adjusted in paragraph (b) of this section;
and
    (2) The aggregate:
    (i) Quantified dollar value of community development services
conducted, as adjusted in paragraph (b) of this section;
    (ii) Quantified dollar value of in-kind donations made, as adjusted
in paragraph (b) of this section; and
    (iii) Monetary donations made, as adjusted in paragraph (b) of this
section.
    (b) Multipliers. The dollar value of the following qualifying
activities will be adjusted by multiplying the actual or quantified
dollar value by 2.
    (1) Activities provided to or that support Community Development
Financial Institutions, except activities related to mortgage-backed
securities;
    (2) Other community development investments, except community
development investments in mortgage-backed securities and municipal
bonds; and
    (3) Other affordable housing-related community development loans.
    (c) Assessment area qualifying activities value. A bank evaluated
under Sec.  25.12 calculates its assessment area qualifying activities
value for each assessment area by using the process described in
paragraph (a) of this section for qualifying activities located in the
assessment area.
Subpart C--Assessment Area
Sec.  25.08   Assessment area.
    (a) General. A bank must delineate one or more assessment areas
within which the OCC evaluates the bank's record of helping to meet the
credit needs of its community. The OCC reviews the delineation for
compliance with the requirements of this section. Unless pursuant to an
approved application covered under Sec.  25.02(a)(3) for a merger or
consolidation with an insured depository institution, an assessment
area delineation can only change once during an evaluation period and
must not change within the annual period used to determine an
assessment area CRA evaluation measure under Sec.  25.10(c).
    (b) Facility-based assessment area(s)--(1) A bank must delineate an
assessment area encompassing each location where the bank maintains a
main office, a branch, or a non-branch deposit-taking facility as well
as the surrounding locations in which the bank has originated or
purchased a substantial portion of its qualifying retail loans.
Assessment areas delineated under this paragraph may contain one or
more of these facilities.
    (2) A facility-based assessment area must be delineated to consist
of:
    (i) One whole metropolitan statistical area (using the metropolitan
statistical area boundaries that were in effect as of January 1 of the
calendar year in which the delineation is made);
    (ii) The whole nonmetropolitan area of a state;
    (iii) One or more whole, contiguous metropolitan divisions in a
single metropolitan statistical area (using the metropolitan division
boundaries that were in effect as of January 1 of the calendar year in
which the delineation is made); or
    (iv) One or more whole, contiguous counties or county equivalents
in a single metropolitan statistical area or nonmetropolitan area.
    (3) A bank may delineate its facility-based assessment area(s) in
the smallest geographic area where it maintains a main office, branch,
or non-branch deposit-taking facility, but may delineate a larger
assessment area that includes these locations, as provided in paragraph
(b)(2) of this section.
    (4) A facility-based assessment area may not extend beyond a
metropolitan statistical area or state boundary unless the assessment
area is located in a multistate metropolitan statistical area. If a
bank serves a geographic area that extends beyond a state boundary, the
bank must delineate separate assessment areas for the areas in each
state. If a bank serves a geographic area that extends beyond a
metropolitan statistical area boundary, the bank must delineate
separate assessment areas for the areas inside and outside the
metropolitan statistical area.
    (c) Deposit-based assessment area(s)--(1) A bank that receives 50
percent or more of its retail domestic deposits from geographic areas
outside of its facility-based assessment areas must delineate separate,
non-overlapping assessment areas in the smallest geographic area where
it receives 5 percent or more of its retail domestic deposits.
    (2) A deposit-based assessment area must be delineated to consist
of:
    (i) One whole state;
    (ii) One whole metropolitan statistical area (using the
metropolitan statistical area boundaries that were in effect as of
January 1 of the calendar year in which the delineation is made);
    (iii) The whole nonmetropolitan area of a state;
    (iv) One or more whole, contiguous metropolitan divisions in a
single metropolitan statistical area (using the metropolitan division
boundaries that were in effect as of January 1 of the calendar year in
which the delineation is made);
    (v) The remaining geographic area of a state, metropolitan
statistical area, nonmetropolitan area, or metropolitan division other
than where it has a facility-based assessment area; or
    (vi) One or more whole, contiguous counties or county equivalents
in a
[[Page 1245]]
single metropolitan statistical area or nonmetropolitan area.
    (d) Limitations on delineation of assessment areas. A bank's
assessment areas must not:
    (1) Reflect illegal discrimination; or
    (2) Arbitrarily exclude low- or moderate-income geographies, taking
into account the bank's size and financial condition.
    (e) Military banks. Notwithstanding the requirements of this
section, a military bank's assessment area will consist of the entire
United States of America and its territories. A military bank will only
be evaluated based on its entire deposit customer base at the bank
level under Sec.  25.12.
    (f) Banks evaluated under strategic plans. A bank evaluated under a
strategic plan will delineate its assessment area(s) in accordance with
the requirements of Sec.  25.16(g)(2).
    (g) Use of assessment area(s). The OCC uses the assessment area(s)
delineated by a bank in its evaluation of the bank's CRA performance
unless the OCC determines that the assessment area(s) do not comply
with the requirements of this section.
Subpart D--Performance Evaluations
Sec.  25.09  Performance standards and ratings, in general.
    (a) Performance standards. The OCC assesses the CRA performance of
a bank in an examination as follows:
    (1) General performance standards--(i) The OCC assesses the CRA
performance of a bank other than banks described in paragraphs (a)(2)
and (a)(3) of this section based on the bank's application of the
general performance standards and determination of its presumptive
ratings under Sec.  25.12.
    (ii) The OCC determines the assigned ratings for a bank evaluated
under Sec.  25.12 as provided in Sec.  25.17.
    (iii) The OCC determines the state or multistate metropolitan
statistical area ratings for a bank evaluated under Sec.  25.12 as
provided in Sec.  25.18.
    (2) Small bank performance standards--(i) The OCC applies the small
bank performance standards as provided in Sec.  25.13 in evaluating the
performance of a small bank, unless the bank is evaluated under an
approved strategic plan as described under (a)(3) of this section or
elects to opt in to the general performance standards under paragraph
(b) of this section.
    (ii) The OCC assigns a small bank evaluated under the small bank
performance standards in Sec.  25.13 lending test and bank-level
ratings as provided for in Appendix A of this part.
    (3) Strategic plan. The OCC evaluates the performance of a bank
under a strategic plan if the bank submits, and the OCC approves, a
strategic plan as provided in Sec.  25.16.
    (b) General performance standards opt in. A small bank may elect to
opt in to be evaluated under the general performance standards
described in paragraph (a)(1) of this section and this election must
occur at least six months before the start of a bank's next evaluation
period. Small banks that elect to be evaluated under the general
performance standards must collect, maintain, and report the data
required for other banks under Sec. Sec.  25.19, 25.22, and 25.23. Once
a small bank has elected to opt in, it must complete at least one
evaluation period under the general performance standards and may elect
no more than once to opt out of the general performance standards and
must do so six months before the start of its next evaluation period.
Small banks that opt out will revert to being evaluated according to
the small bank performance standards as provided in Sec.  25.13 in
evaluating the performance of a small bank, unless the bank is
evaluated under an approved strategic plan as described under (a)(3) of
this section.
    (c) Safe and sound operations. This part and the CRA do not require
a bank to make loans or investments or to provide services that are
inconsistent with safe and sound operations. To the contrary, the OCC
anticipates banks can meet the standards of this part with safe and
sound loans, investments, and services on which the banks expect to
make a profit. Banks are permitted and encouraged to develop and apply
flexible underwriting standards for loans that benefit low- or
moderate-income geographies or individuals, only if consistent with
safe and sound operations.
Sec.  25.10  CRA evaluation measure.
    (a) CRA evaluation measure. A bank evaluated as described in Sec.
25.12 will determine its bank-level and assessment area CRA evaluation
measures annually as part of its CRA performance evaluation.
    (b) Determination of the bank-level CRA evaluation measure. A
bank's bank-level CRA evaluation measure is the sum of:
    (1) The bank's annual bank-level qualifying activities values
calculated under Sec.  25.07(a) divided by the average quarterly value
of the bank's retail domestic deposits as of the close of business on
the last day of each quarter for the same period used to calculate the
annual qualifying activities value; and
    (2) The number of the bank's branches located in low- or moderate-
income census tracts, distressed areas, underserved areas, and Indian
country divided by its total number of branches as of the close of
business on the last day of the same period used to calculate the
annual qualifying activities value multiplied by .01.
    (c) Determination of the assessment area CRA evaluation measure. A
bank's assessment area CRA evaluation measure is determined in each
assessment area and is the sum of:
    (1) The bank's annual assessment area qualifying activities value
calculated under Sec.  25.07(c); divided by the average quarterly value
of the bank's assessment area retail domestic deposits as of the close
of business on the last day of each quarter for the same period used to
calculate the annual assessment area qualifying activities value; and
    (2) The number of the bank's branches located in low- or moderate-
income census tracts in the assessment area divided by its total number
of branches in the assessment area as of the close of business on the
last day of the same period used to calculate the annual assessment
area qualifying activities value multiplied by .01.
    (d) Average CRA evaluation measures. For each evaluation period, a
bank will calculate the average of its:
    (1) Annual bank-level CRA evaluation measures for each year in the
evaluation period; and
    (2) Annual assessment area CRA evaluation measures for each year in
the evaluation period, separately for each assessment area.
Sec.  25.11  Retail lending distribution tests.
    (a) General. In each assessment area, a bank evaluated as described
in Sec.  25.12 will apply a:
    (1) Geographic distribution test for its small loan to a business
product line or small loan to a farm product line if those product
lines are major retail lending product lines with 20 or more
originations in the assessment area during the evaluation period; and
    (2) Borrower distribution test for each major retail lending
product line with 20 or more originations in the assessment area during
the evaluation period.
    (b) Geographic distribution test--(1) Small loan to a business
product line. To pass the geographic distribution test for the small
loan to a business product line, a bank's percentage of small loans to
businesses in low- or moderate-income census tracts originated during
the evaluation period in the assessment area must meet or exceed the
threshold established for either the associated geographic demographic
comparator or
[[Page 1246]]
the associated geographic peer comparator.
    (i) Geographic demographic comparator threshold. The geographic
demographic comparator threshold is 55 percent of the percentage of
businesses in low- and moderate-income census tracts in the assessment
area.
    (ii) Geographic peer comparator threshold. The geographic peer
comparator threshold is 65 percent of the percentage of small loans to
businesses in low- and moderate-income census tracts originated by all
banks evaluated under the general performance standards in Sec.  25.12
in the assessment area.
    (2) Small loan to a farm product line. To pass the geographic
distribution test for the small loan to a farm product line, a bank's
percentage of small loans to farms in low- or moderate-income census
tracts originated during the evaluation period in the assessment area
must meet or exceed the threshold established for either the associated
geographic demographic comparator or the associated geographic peer
comparator.
    (i) Geographic demographic comparator threshold. The geographic
demographic comparator threshold is 55 percent of the percentage of
farms in low- and moderate-income census tracts in the assessment area.
    (ii) Geographic peer comparator threshold. The geographic peer
comparator threshold is 65 percent of the percentage of small loans to
farms in low- and moderate-income census tracts originated by all banks
evaluated under the general performance standards in Sec.  25.12 in the
assessment area.
    (c) Borrower distribution test--(1) Home mortgage lending product
line. To pass the borrower distribution test for the home mortgage
lending product line, a bank's percentage of home mortgage loans to
low- and moderate-income individuals and families originated during the
evaluation period in the assessment area must meet or exceed the
threshold established for either the associated borrower demographic
comparator or the associated borrower peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
low- and moderate-income families in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of home mortgage
loans to low- or moderate-income individuals and families originated by
all banks evaluated under the general performance standards in Sec.
25.12 in the assessment area.
    (2) Consumer lending product line. To pass the borrower
distribution test for a consumer lending product line, a bank's
percentage of consumer loans to low- and moderate-income individuals
and families originated during the evaluation period in the assessment
area must meet or exceed the threshold established for either the
associated demographic borrower comparator or the associated
demographic peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
low- and moderate-income individuals in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of consumer loans
to low- or moderate-income individuals and families originated by all
banks evaluated under the general performance standards in Sec.  25.12
in the assessment area.
    (3) Small loan to a business product line. To pass the borrower
distribution test for the small loan to a business product line, a
bank's percentage of small loans to businesses provided to small
businesses originated during the evaluation period in the assessment
area must meet or exceed the threshold established for either the
associated demographic borrower comparator or the associated
demographic peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
small businesses in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of small loans to
businesses provided to small businesses from all banks evaluated under
the general performance standards in Sec.  25.12 in the assessment
area.
    (4) Small loan to a farm product line. To pass the borrower
distribution test for the small loan to a farm product line, a bank's
percentage of small loans to farms provided to small farms originated
during the evaluation period in the assessment area must meet or exceed
the thresholds established for either the associated demographic
borrower comparator or the associated demographic peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
small farms in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of small loans to
farms provided to small farms from all banks evaluated under the
general performance standards in Sec.  25.12 in the assessment area.
Sec.  25.12   General performance standards and presumptive rating.
    (a) General. The bank-level presumptive rating and assessment area
presumptive rating(s) for banks assessed under this section are
determined by evaluating whether a bank has met all the performance
standards associated with a given rating category, at the bank level
and in each assessment area. A bank will use the performance standards
in effect on the first day of its evaluation period for the duration of
its evaluation period, unless the bank elects to use performance
standards published later during the evaluation period. If the bank
elects to use a later-published performance standard, that performance
standard will apply during the entire evaluation period.
    (b) Performance standards adjustments. The agencies will
periodically adjust the performance standards.
    (1) Factors considered. When adjusting the performance standards,
the agencies will consider factors such as the level of qualifying
activities conducted by all banks, market conditions, and unmet needs
and opportunities.
    (2) Public notice and comment. The agencies will provide for a
public notice and comment period on any proposed adjustments prior to
finalizing the adjustments.
    (c) Bank-level performance standards--(1) Outstanding. The bank-
level outstanding performance standards are:
    (i) CRA evaluation measure. The average of the bank's bank-level
CRA evaluation measures during the evaluation period, expressed as a
percentage, must meet or exceed 11 percent;
    (ii) Assessment area ratings. The bank received an assigned rating
of outstanding in a significant portion of its assessment areas and in
those assessment areas where it holds a significant amount of deposits;
and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments
during the evaluation period, as valued in Sec.  25.07, divided by the
average
[[Page 1247]]
quarterly value of the bank's retail domestic deposits as of the close
of business on the last day of each quarter of the evaluation period,
must meet or exceed 2 percent.
    (2) Satisfactory. The bank-level satisfactory performance standards
are:
    (i) CRA evaluation measure. The average of the bank's bank-level
CRA evaluation measures during the evaluation period, expressed as a
percentage, must meet or exceed 6 percent;
    (ii) Assessment area ratings. The bank received at least an
assigned rating of satisfactory in a significant portion of its
assessment areas and in those assessment areas where it holds a
significant amount of deposits; and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments
during the evaluation period, as valued in Sec.  25.07, divided by the
average quarterly value of the bank's retail domestic deposits as of
the close of business on the last day of each quarter of the evaluation
period, must meet or exceed 2 percent.
    (3) Needs to improve. The bank-level needs to improve performance
standard is an average bank-level CRA evaluation measure during the
evaluation period, expressed as a percentage, that meets or exceeds 3
percent.
    (4) Substantial noncompliance. The bank-level substantial
noncompliance standard is an average bank-level CRA evaluation measure
during the evaluation period, expressed as a percentage, that does not
meet or exceed 3 percent.
    (d) Assessment area performance standards--(1) Outstanding. The
assessment area outstanding performance standards are:
    (i) Retail lending distribution tests. The bank must pass the
geographic and borrower distribution tests for its major retail lending
product lines evaluated in Sec.  25.11;
    (ii) CRA evaluation measure. The assessment area average CRA
evaluation measure during the evaluation period, expressed as a
percentage, must meet or exceed 11 percent; and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments in
the assessment area during the evaluation period, as valued in Sec.
25.07, divided by the average quarterly value of the bank's assessment
area retail domestic deposits as of the close of business on the last
day of each quarter of the evaluation period, must meet or exceed 2
percent.
    (2) Satisfactory. The assessment area satisfactory performance
standards are:
    (i) Retail lending distribution tests. The bank must pass both the
geographic and borrower distribution tests for all retail lending
product lines evaluated in Sec.  25.11;
    (ii) CRA evaluation measure. The assessment area average CRA
evaluation measure during the evaluation period, expressed as a
percentage, must meet or exceed 6 percent; and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments in
the assessment area during the evaluation period, as valued in Sec.
25.07, divided by the average quarterly value of the bank's assessment
area retail domestic deposits as of the close of business on the last
day of each quarter of the evaluation period, must meet or exceed 2
percent.
    (3) Needs to improve. The assessment area needs to improve
performance standard is an assessment area average CRA evaluation
measure during the evaluation period, expressed as a percentage, that
must meet or exceed 3 percent.
    (4) Substantial noncompliance. The assessment area substantial
noncompliance performance standard is an assessment area average CRA
evaluation measure during the evaluation period, expressed as a
percentage that does not meet or exceed 3 percent.
Sec.  25.13   Small bank performance standards.
    (a) Performance lending test criteria. The OCC evaluates the record
of a small bank of helping to meet the credit needs of its assessment
area(s) pursuant to the following criteria:
    (1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation, and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets, community
development loans, or community development investments;
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
    (3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's loans; and
    (5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in helping to meet credit
needs in its assessment area(s).
    (b) Small bank performance rating. The OCC assesses the performance
of a small bank evaluated under this section as provided in appendix A
of this part.
Sec.  25.14   Consideration of performance context.
    (a) General. Performance context is used to assess how the factors
in paragraph (b) of this section affect a bank's capacity and
opportunity to meet the performance standards described in Sec. Sec.
25.12, 25.13, or 25.16. Based on that assessment, the OCC may adjust:
    (1) The assessment area and bank-level presumptive ratings in Sec.
25.12; or
    (2) The small bank lending test and bank-level ratings as described
in appendix A.
    (b) Performance context factors. In assessing performance context,
the OCC considers and documents the effect of the following factors
when determining the assigned rating:
    (1) The bank's explanation of how its capacity to meet the
performance standards described in Sec. Sec.  25.12, 25.13, or 25.16
was affected by:
    (i) The bank's product offerings and business strategy;
    (ii) The bank's unique constraints, such as its financial
condition, safety and soundness limitations, or other factors;
    (iii) The innovativeness, complexity, and flexibility of the bank's
qualifying activities;
    (iv) The bank's development of business infrastructure and staffing
to support the purpose of this part; and
    (v) The responsiveness of the bank's qualifying activities to the
needs of the community;
    (2) The bank's explanation of how its opportunity to engage in
qualifying activities was affected by:
    (i) The demand for qualifying activities, including credit needs
and market opportunities identified in a Federal Home Loan Bank
Targeted Community Lending Plan provided for in 12 CFR 1290.6(a)(5), as
applicable;
    (ii) The demand for retail loans in low- or moderate-income census
tracts; and
    (iii) Demographic factors (e.g., housing costs, unemployment rates
variation);
    (3) The bank's competitive environment, as demonstrated by peer
performance.
    (4) Any written comments about assessment area needs and
opportunities submitted to the bank or the OCC; and
    (5) Any other information deemed relevant by the OCC.
[[Page 1248]]
    (c) Form. Banks other than small banks must submit the information
in paragraph (b) of this section on the performance context form
available on www.occ.gov.
Sec.  25.15   Discriminatory and other illegal credit practices.
    (a) Evidence of discriminatory or other illegal credit practices. A
bank's CRA performance is adversely affected by evidence of
discriminatory or other illegal credit practices. In assessing a bank's
CRA performance, the OCC's evaluation will consider evidence of
discriminatory or other illegal credit practices including but not
limited to:
    (1) Discrimination against applicants on a prohibited basis in
violation, for example, of the Equal Credit Opportunity Act or the Fair
Housing Act;
    (2) Violations of the Home Ownership and Equity Protection Act;
    (3) Violations of section 5 of the Federal Trade Commission Act;
    (4) Violations of section 8 of the Real Estate Settlement
Procedures Act;
    (5) Violations of the Truth in Lending Act provisions regarding a
consumer's right of rescission;
    (6) Violations of the Military Lending Act; and
    (7) Violations of the Servicemembers Civil Relief Act.
    (b) Effect of evidence of discriminatory or other illegal credit
practices. In determining the effect of evidence of practices described
in paragraph (a) of this section on the bank's assigned rating, the OCC
considers the nature, extent, and strength of the evidence of the
practices; the policies and procedures that the bank has in place to
prevent the practices; any corrective action that the bank has taken or
has committed to take, including voluntary corrective action resulting
from self-assessment; and any other relevant information.
Sec.  25.16   Strategic plan.
    (a) General. The OCC assesses a bank's record of helping to meet
the credit needs of its assessment area(s) under a strategic plan if:
    (1) The bank has submitted the plan to the OCC as provided for in
this section;
    (2) The OCC has approved the plan;
    (3) The plan is in effect; and
    (4) The bank has been operating under an approved plan for at least
one year.
    (b) Plan submission--(1) Required submission. A bank must submit a
strategic plan that meets the requirements of this section if the bank:
    (i) Would otherwise be evaluated under Sec.  25.12 and does not
maintain retail domestic deposits on-balance sheet; or
    (ii) Is a small bank that does not originate retail loans.
    (2) Optional submission. A bank not covered under paragraph (b)(1)
of this section may submit a strategic plan to the OCC for approval.
    (c) Data reporting. The OCC's approval of a plan does not affect
the bank's data collection, recordkeeping, and reporting obligations,
if any, in Sec. Sec.  25.19, 25.20, 25.22, and 25.23, unless otherwise
determined in writing by the OCC. The OCC may require additional bank-
specific data collection, recordkeeping, and reporting under a
strategic plan, as appropriate.
    (d) Plans in general--(1) Term. A plan may have a term of no more
than five years, and any multi-year plan must include annual interim
measurable goals under which the OCC evaluates the bank's performance.
    (2) Multiple assessment areas. A bank with more than one assessment
area may prepare a single plan for all of its assessment areas or
separate plans for one or more of its assessment areas.
    (e) Public participation in plan development. Before submitting a
plan to the OCC for approval, a bank must:
    (1) Solicit public comment on the plan for at least 30 days by
submitting the plan for publication on the OCC's website and by
publishing notice in at least one newspaper of general circulation in
each assessment area covered by the plan; and
    (2) During the public comment period, make copies of the plan
available for review by the public and provide copies of the plan upon
request for a reasonable fee to cover copying, printing, or mailing, if
applicable.
    (f) Submission of plan. The bank must submit its complete plan to
the OCC at least six months prior to the proposed effective date of the
plan. The bank must also submit with its plan a description of any
written public comments received, including how the plan was revised in
light of the comments received. If the OCC determines the plan is not
complete, the OCC will notify bank specifying the information needed,
designating a reasonable period of time for the bank to provide the
information, and informing the bank that failure to provide the
information requested will result in no further consideration being
given to the plan.
    (g) Plan content--(1) Performance standards--(i) A plan must
specify measurable goals for helping to meet the credit needs of the
bank's communities at the bank level and in each of its assessment
areas, particularly the needs of low- and moderate-income census tracts
and low- and moderate-income individuals and families, through
qualifying activities.
    (ii) A plan must address the types and volume of qualifying
activities the bank will conduct. A plan may focus on one or more types
of qualifying activities considering the bank's capacity and
constraints, product offerings, and business strategy.
    (2) Assessment area delineation. A plan must include a delineation
of the bank's assessment area(s) that meets the requirements of Sec.
25.08(a)-(d). In addition, the plan may include assessment area
delineations that reflect its target geographic market as defined by
the bank in its strategic plan. For a de novo bank, the assessment area
delineations should include the projected location of its facilities,
retail domestic deposit base, and lending activities.
    (3) Confidential information. A bank may submit additional
information to the OCC on a confidential basis, to the extent permitted
by law, but the goals stated in the plan must be sufficiently specific
to enable the public and the OCC to judge the merits of the plan.
    (4) Satisfactory and outstanding performance standards. A plan must
specify measurable goals that constitute satisfactory performance. A
plan may specify measurable goals that constitute outstanding
performance. If a bank submits, and the OCC approves, both satisfactory
and outstanding performance goals, the OCC considers the bank eligible
for an outstanding performance rating.
    (h) Plan approval--(1) Timing. The OCC will act upon a plan within
6 months after the OCC receives the complete plan and other material
required under paragraph (g) of this section. If the OCC does not act
within this time period, the plan will be deemed approved unless the
OCC extends the review period for good cause for no more than 90 days.
    (2) Public participation. In evaluating the plan's goals, the OCC
considers any written public comment on the plan and any response by
the bank to any written public comment on the plan.
    (3) Criteria for evaluating a plan. The OCC evaluates a plan's
goals by considering the extent and breadth of the qualifying
activities including:
    (i) Community development loans, community development investments,
and community development services; and
    (ii) The use of innovative, flexible, or complex qualifying
activities.
    (i) Plan amendment. During the term of a plan, a bank may request
the OCC
[[Page 1249]]
to approve an amendment to the plan on grounds that there has been a
material change in circumstances. The OCC reserves the right to require
a bank that requests an amendment to a plan to comply with the public
participation process described in paragraph (e) of this section.
Sec.  25.17  Assigned ratings.
    (a) General performance standards--(1) Bank-level assigned rating.
The OCC determines the bank-level assigned rating for a bank evaluated
under Sec.  25.12 based on its bank-level presumptive rating under
Sec.  25.12, adjusted for performance context under Sec.  25.14, and
consideration of discriminatory or other illegal credit practices under
Sec.  25.15.
    (2) Assessment area assigned rating. The OCC determines the
assessment area assigned ratings for a bank evaluated under Sec.  25.12
based on its assessment area presumptive rating under Sec.  25.12,
adjusted for performance context under Sec.  25.14 and consideration of
discriminatory or other illegal credit practices under Sec.  25.15.
    (b) Strategic plans assigned rating. A bank operating under a
strategic plan will receive, as applicable, assessment area assigned
ratings, a bank-level assigned rating, and state-level and multistate
metropolitan statistical area assigned ratings of satisfactory or
outstanding if it has met the measurable goals in the plan that
correspond to those ratings after considering performance context under
Sec.  25.14.
Sec.  25.18  State/multistate metropolitan statistical area assigned
rating.
    For a bank evaluated under Sec.  25.12 with interstate branches,
the OCC will assign a rating for each state where the bank has a
facility-based assessment area and each multistate metropolitan
statistical area where the bank has a main office, branch, or non-
branch deposit-taking facility in two or more states in the multistate
metropolitan statistical area. The state or multistate metropolitan
statistical area assigned rating for that state or multistate
metropolitan statistical area is the lowest rating assigned to a
significant number of its assessment areas within that state or
multistate metropolitan statistical area.
Subpart E [Redesignated]
0
3. Redesignate subpart E as subpart F and redesignate Sec. Sec.  25.61
through 25.65 as Sec. Sec.  25.28 through 25.32, respectively.
0
4. Add new subpart E to read as follows:
Subpart E--Data Collection, Recordkeeping, and Reporting
Sec.
25.19 Data collection for banks evaluated under the general
performance standards in Sec.  25.12 or a strategic plan under Sec.
25.16.
25.20 Retail domestic deposit data collection and recordkeeping for
small banks evaluated under the small bank performance standards in
Sec.  25.13.
25.21 Activity location.
25.22 Recordkeeping.
25.23 Reporting for banks evaluated under the general performance
standards in Sec.  25.12 or a strategic plan under Sec.  25.16.
25.24 Public disclosures.
25.25 Content and availability of public file.
25.26 Availability of planned evaluation schedule.
25.27 Public notice by banks.
Sec.  25.19   Data collection for banks evaluated under the general
performance standards in Sec.  25.12 or a strategic plan under Sec.
25.16.
    (a) General. Banks evaluated under the general performance
standards in Sec.  25.12 and banks evaluated under a strategic plan
under Sec.  25.16, unless otherwise determined in writing by the OCC,
must collect and maintain the information required by this section.
    (b) Performance standards data. A bank must collect and maintain
the results of its:
    (1) Retail lending distribution tests under Sec.  25.11 for the
borrower distribution and geographic distribution tests for each major
retail lending product line evaluated in the assessment area;
    (2) Bank-level and each assessment-area level CRA evaluation
measures calculated under Sec.  25.10; and
    (3) Presumptive ratings under Sec.  25.12.
    (c) Qualifying activities and retail domestic deposit data required
to be collected and maintained. A bank subject to this section must
collect and maintain the following data and supporting documentation
for all qualifying activities and certain non-qualifying activities
conducted by the bank until the completion of its next CRA evaluation:
    (1) Qualifying loan data. For each qualifying loan:
    (i) A unique number or alpha-numeric symbol to identify the
relevant loan file;
    (ii) Loan type;
    (iii) Date of:
    (A) Origination for loans originated by the bank, if applicable;
    (B) Purchase for loans not originated by the bank, if applicable;
and
    (C) Sale if the loan is a retail loan and sold by the bank within
90 days of origination;
    (iv) An indicator of whether the loan was originated or purchased;
    (v) The loan amount at origination or purchase;
    (vi) The outstanding dollar amount of the loan, as of the close of
business on the last day of the month, for each month that the loan is
on-balance sheet;
    (vii) The loan location and the associated FIPS code for the MSA,
state, county or county equivalent, and census tract;
    (viii) The income or revenue of the borrower; and
    (ix) The criteria in Sec.  25.04 that the loan satisfies or that it
is on the illustrative list referenced in Sec.  25.05 and whether it
serves a particular assessment area, if applicable.
    (2) Other loan data. A bank must collect and maintain the following
data and supporting documentation for non-qualifying home mortgage
loans and consumer loans originations by the bank until the completion
of its next CRA evaluation:
    (i) A unique number or alpha-numeric symbol to identify the
relevant loan file;
    (ii) Loan type;
    (iii) The date of origination;
    (iv) The loan amount at origination;
    (v) The loan location and the associated FIPS code for the MSA,
state, county or county equivalent, and census tract; and
    (vi) The income of the borrower.
    (3) Number of home mortgage and consumer loans. For the home
mortgage product line and each consumer loan product line as defined in
Sec.  25.03, for each county or county equivalent:
    (i) The number of loans originated; and
    (ii) The number of loans originated to low- and moderate-income
borrowers.
    (4) Number of small loans to businesses. For the small loan to a
business product line, for each county or county equivalent:
    (i) The number of loans originated;
    (ii) The number of loans originated in low- and moderate-income
census tracts; and
    (iii) The number of loans originated to small businesses.
    (5) Number of small loans to farms. For the small loan to a farm
product line for each county or county equivalent:
    (i) The number of loans originated;
    (ii) The number of loans originated in low- and moderate-income
census tracts; and
    (iii) The number of loans originated to small farms.
    (6) Community development investment data. For each community
development investment:
    (i) A unique number, alpha-numeric symbol, or another mechanism to
identify the investment;
    (ii) Investment type;
[[Page 1250]]
    (iii) Date of investment by the bank;
    (iv) The outstanding dollar value of the investment, as of the
close of business on the last day of the month, for each month that the
investment is on-balance sheet;
    (v) The value of the monetary donation, as quantified in Sec.
25.06;
    (vi) The value of the in-kind donation, as quantified in Sec.
25.06;
    (vii) The investment location and the associated FIPS code for the
MSA, state, county or county equivalent, and census tract, if
applicable; and
    (viii) The criteria in Sec.  25.04 that the investment satisfies or
that it is on the illustrative list referenced in Sec.  25.05 and
whether it serves a particular assessment area, if applicable.
    (7) Community development services data. For each community
development service:
    (i) The dollar value of the services, as quantified in Sec.  25.06;
    (ii) A description of the qualifying activity;
    (iii) The date the service was performed;
    (iv) The service location and the associated FIPS code for the MSA,
state, county or county equivalent, and census tract, if applicable;
and
    (v) The qualifying activity criteria in Sec.  25.04 that the
service satisfies or that it is on the illustrative list referenced in
Sec.  25.05.
    (8) Retail domestic deposit data. The value of each retail domestic
deposit account and the physical address of each depositor as of the
close of business on the last day of each quarter during the
examination period.
    (d) Data collection certification. A bank must collect and maintain
a certification from each party conducting qualifying activities on
behalf of the bank that the information that the party provided to the
bank as described in paragraph (a) of this section is true and correct.
    (e) Assessment areas. A bank must collect and maintain until the
completion of its next CRA evaluation a list of its assessment area(s)
showing within the assessment area(s) each:
    (1) County or county equivalent;
    (2) Metropolitan division;
    (3) Nonmetropolitan area;
    (4) Metropolitan statistical area; or
    (5) State.
    (f) Bank facilities. A bank must collect and maintain until the
completion of its next CRA evaluation information indicating whether
each facility operated by the bank during the evaluation period was a
depository or non-depository facility.
Sec.  25.20   Retail domestic deposit data collection and recordkeeping
for small banks evaluated under the small bank performance standards in
Sec.  25.13.
    Retail domestic deposit data collection. Small banks must collect
and maintain data on the value of each retail domestic deposit account
and the physical address of each depositor as of the close of business
on the last day of each quarter during the examination period until the
completion of its next CRA evaluation.
Sec.  25.21   Activity location.
    (a) For the purpose of this part:
    (1) A consumer loan is located at the borrower's physical address
on file with the bank;
    (2) A home mortgage loan is located at the address of the property
to which the loan relates; and
    (3) A business or farm loan is located at the physical address of
the main business facility or farm or the physical address where the
loan proceeds will be applied, as indicated by the borrower; and
    (b) For the purpose of this part, the location of a community
development loan, a community development investment, or a community
development service is:
    (1) The address of a particular project to the extent a bank can
document that the services or funding it provided was allocated to that
particular project; or
    (2) Determined by allocating the activity across all of a bank's
assessment areas and other metropolitan statistical areas or non-
metropolitan statistical areas served by the activity according to the
share of the bank's deposits in those areas, treating the bank's
deposits in the region served by the activity as if they were all of
the bank's deposits, to the extent the bank cannot document that the
services or funding it provided was allocated to a particular project.
Sec.  25.22   Recordkeeping.
    Banks must keep the data collected under Sec.  25.19 and Sec.
25.20 in machine readable form (as prescribed by the OCC) until the
completion of their next CRA evaluation.
Sec.  25.23   Reporting for banks evaluated under the general
performance standards in Sec.  25.12 or a strategic plan under Sec.
25.16.
    (a) General. Banks evaluated under the general performance
standards in Sec.  25.12 and banks evaluated under a strategic plan
under Sec.  25.16, unless otherwise determined in writing by the OCC,
must report the information required by this section.
    (b) Performance standards data. On an annual basis, a bank subject
to this section must report to the OCC the information required by
Sec.  25.19(b).
    (c) Qualifying activities data. On an annual basis, a bank subject
to this section must report to the OCC the following data for all
qualifying activities conducted during the annual period:
    (1) The quantified value of qualifying retail loans;
    (2) The quantified value of community development loans;
    (3) The quantified value of community development investments; and
    (4) The quantified value of community development services.
    (d) Data collection certification. A bank subject to this section
must annually provide to the OCC any certification required by Sec.
25.19(d).
    (e) Assessment area data. For each assessment area, a bank subject
to this section must annually report to the OCC the information
required by Sec.  25.19(e).
    (f) Retail loans. A bank subject to this section must annually
report to the OCC the information required by Sec.  25.19(c)(3)-(5) for
loans originated during the annual period.
    (g) Retail domestic deposit data. A bank subject to this section
must annually report its average quarterly retail domestic deposits as
of the close of business on the last day of each quarter.
    (h) Performance context information. A bank subject to this section
must report performance context information on the form required by
Sec.  25.14(c).
    (i) Form. Banks subject to this section must use the CRA data
reporting form available at www.occ.gov to meet the reporting
requirements in this section.
Sec.  25.24  Public disclosures.
    (a) Individual CRA Disclosure Statement. The OCC prepares annually
a CRA Disclosure Statement for each bank evaluated under Sec.  25.12
that contains at the bank level:
    (1) The quantified value of qualifying retail loans;
    (2) The quantified value of community development loans;
    (3) The quantified value of community development investments; and
    (4) The quantified value of community development services.
    (b) Aggregate CRA Disclosure Statement. The OCC prepares annually,
for each county, an aggregate CRA Disclosure Statement of home
mortgage, consumer, small loans to businesses, and small loans to farms
lending by all banks subject to reporting under this part. This
disclosure statement includes the following information, at the county
[[Page 1251]]
level, from all banks evaluated under Sec.  25.12, except that the OCC
may adjust the form of the disclosure if necessary, because of special
circumstances, to protect the privacy of a borrower or bank:
    (1) The number of home mortgage loan originations;
    (2) The number of home mortgage loan originations to low- or
moderate-income individuals and families;
    (3) The number of originations for each consumer loan product line;
    (4) The number of originations to low- or moderate-income
individuals and families for each consumer loan product line;
    (5) The number of small loans to businesses;
    (6) The number of small loans to businesses in low- and moderate-
income census tracts;
    (7) The number of small loans to businesses provided to small
businesses;
    (8) The number of small loans to farms;
    (9) The number of small loans to farms in low- and moderate-income
census tracts; and
    (10) The number of small loans to farms provided to small farms;
    (c) Availability of CRA disclosure statements. The OCC will
annually make publicly available the aggregate and individual CRA
Disclosure Statements, described in paragraphs (a) and (b) of this
section.
    (d) Availability of ratings. The OCC will make available the
ratings of all OCC-regulated banks and a list of all banks that achieve
an assigned rating of outstanding. A bank that achieves an outstanding
assigned rating will receive a certificate or seal of achievement that
may be displayed on its website and in its main office and branches.
Sec.  25.25  Content and availability of public file.
    (a) Information available to the public. A bank must maintain a
public file that includes the following information:
    (1) All written comments received from the public for the current
year and each of the prior two calendar years that specifically relate
to assessment area needs and opportunities, and any response to the
comments by the bank, if neither the comments nor the responses contain
statements that reflect adversely on the good name or reputation of any
persons other than the bank or publication of which would violate
specific provisions of law;
    (2) A copy of the public section of the bank's most recent CRA
Performance Evaluation prepared by the OCC. The bank must place this
copy in the public file within 30 business days after its receipt from
the OCC;
    (3) A list of the bank's branches, their street addresses, and
census tracts;
    (4) A list of branches opened or closed by the bank during the
current year and each of the prior two calendar years, their street
addresses, and geographies;
    (5) A list of services (including hours of operation, available
loan and deposit products, and transaction fees) generally offered at
the bank's branches and descriptions of material differences in the
availability or cost of services at particular branches, if any. At its
option, a bank may include information regarding the availability of
alternative systems for delivering retail banking services (e.g., ATMs,
ATMs not owned or operated by or exclusively for the bank, banking by
telephone or computer, loan production offices, and bank-at-work or
bank-by-mail programs);
    (6) A map of each assessment area showing the boundaries of the
area and identifying the geographies contained within the area, either
on the map or in a separate list; and
    (7) Any other information the bank chooses.
    (b) Additional information available to the public--(1) Banks with
strategic plans. A bank that has been approved to be assessed under a
strategic plan must include in its public file a copy of that plan. A
bank need not include information submitted to the OCC on a
confidential basis in conjunction with the plan.
    (2) Banks with less than satisfactory ratings. A bank that received
a less than satisfactory rating during its most recent examination must
include in its public file a description of its current efforts to
improve its performance in helping to meet the credit needs of its
entire community. The bank must update the description quarterly.
    (c) Availability of public information. A bank must make available
to the public the information required in this section.
    (d) Updating. Except as otherwise provided in this section, a bank
must ensure that the information required by this section is current as
of April 1 of each year.
Sec.  25.26   Availability of planned evaluation schedule.
    The OCC will make available at least 30 days in advance of the
beginning of each calendar quarter a list of banks scheduled for CRA
evaluations in that quarter.
Sec.  25.27   Public notice by banks.
    A bank must make available to the public the notice set forth in
Appendix B of this part. Parenthetical text must be adjusted by each
bank as appropriate. Bracketed text must be included if applicable.
0
5. Revise paragraph (a) of newly designated Sec.  25.29 to read as
follows:
Sec.  25.29   Definitions.
* * * * *
    (a) Bank means, unless the context indicates otherwise, a national
bank and a foreign bank as that term is defined in 12 U.S.C. 3101(7)
and 12 CFR 28.11(i).
* * * * *
Sec.  25.30   [Amended]
0
6. In newly designated Sec.  25.30 amend paragraph (b)(2) by removing
``Sec.  25.64'' and adding ``Sec.  25.31'' in its place.
0
7. Revise Appendix A to read as follows:
Appendix A to Part 25--Small Bank Ratings
    (a) Ratings in general--(1) In assigning a rating, the OCC
evaluates a small bank's performance under the applicable
performance criteria in Sec.  25.13, adjusting for performance
context in Sec.  25.14 and consideration of any evidence of
discriminatory and illegal credit practices as described in Sec.
25.15. This includes consideration of low-cost education loans
provided to low-income borrowers and activities in cooperation with
minority- or women-owned financial institutions and low-income
credit unions.
    (2) A bank's performance need not fit each aspect of a
particular rating profile in order to receive that rating, and
exceptionally strong performance with respect to some aspects may
compensate for weak performance in others. The bank's overall
performance, however, must be consistent with safe and sound banking
practices and generally with the appropriate rating profile as
follows.
    (b) Banks evaluated under the small bank performance standards--
(1) Lending test ratings--(i) Eligibility for a satisfactory lending
test rating. The OCC rates a small bank's lending performance
``satisfactory'' if, in general, the bank demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its assessment area(s), and taking into account, as
appropriate, other lending-related activities such as loan
originations for sale to the secondary markets and community
development loans and community development investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other
lending-related activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of
[[Page 1252]]
different sizes that is reasonable given the demographics of the
bank's assessment area(s);
    (D) A record of taking appropriate action, when warranted, in
response to written complaints, if any, about the bank's performance
in helping to meet the credit needs of its assessment area(s); and
    (E) A reasonable geographic distribution of loans given the
bank's assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A
small bank that meets each of the standards for a ``satisfactory''
rating under this paragraph and exceeds some or all of those
standards may warrant consideration for a lending test rating of
``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A
small bank may also receive a lending test rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standard for a
``satisfactory'' rating.
    (2) Bank-level rating--(i) Eligibility for an outstanding
overall rating. A small bank that meets each of the standards for a
``satisfactory'' rating under the lending test and exceeds some or
all of those standards may warrant consideration for a bank-level
rating of ``outstanding.'' In assessing whether a bank's performance
is ``outstanding,'' the OCC considers the extent to which the bank
exceeds each of the performance standards for a ``satisfactory''
rating and its performance in making community development
investments and its performance in providing branches and other
services and delivery systems that enhance credit availability in
its assessment area(s).
    (ii) Needs to improve or substantial noncompliance overall
ratings. A small bank may also receive a rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standards for a
``satisfactory'' rating.
0
8. Revise Appendix B to read as follows:
Appendix B to Part 25--Community Reinvestment Act Notice
    Under the Federal Community Reinvestment Act (CRA), the
Comptroller of the Currency (OCC) evaluates our record of helping to
meet the credit needs of this community, consistent with safe and
sound operations. The OCC also takes this record into account when
deciding on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and
our performance under the CRA, including, for example, information
about our branches, such as their location and services provided at
them; the public section of our most recent CRA Performance
Evaluation, prepared by the OCC; and comments received from the
public relating to assessment area needs and opportunities, as well
as our responses to those comments. You may review this information
today by reviewing the public section of our most recent CRA
evaluation, prepared by the OCC, which is available at (web address
and/or physical address at which the public file can be reviewed and
copied).
    You may also have access to the following additional
information, which we will make available to you after you make a
request to us: (1) A map showing the assessment area containing a
select branch, which is the area in which the OCC evaluates our CRA
performance for that particular community; (2) branch addresses and
associated branch facilities and hours in any assessment area; (3) a
list of services we provide at those locations; (4) our most recent
rating in the assessment area; and (5) copies of all written
comments received by us that specifically relate to the needs and
opportunities of a given assessment area, and any responses we have
made to those comments. If we are operating under an approved
strategic plan, you may also have access to a copy of the plan.
    At least 30 days before the beginning of each quarter, the OCC
publishes a nationwide list of the (entity type) that are scheduled
for CRA examination in that quarter. This list is available from the
Deputy Comptroller (address). You may send written comments
regarding the needs and opportunities of any of the (entity type)'s
assessment area(s) to (name, address, and email address of official
at bank) and Deputy Comptroller (address and email address). Your
comments, together with any response by us, will be considered by
the Comptroller in evaluating our CRA performance and may be made
public.
    You may ask to look at any comments received by the Deputy
Comptroller. You may also request from the Deputy Comptroller an
announcement of our applications covered by the CRA filed with the
Comptroller. (We are an affiliate of (name of holding company), a
(entity type) holding company. You may request from the (title of
responsible official), Federal Reserve Bank of __(address) an
announcement of applications covered by the CRA filed by (entity
type) holding companies.)
PART 195--[REMOVED]
0
9. Under the authority of 12 U.S.C. 93a, 1462a, 1463, 1464, and
5412(b)(2)(B), remove part 195.
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Chapter III
0
10. For the reasons discussed in the preamble, the Board of Directors
of the Federal Deposit Insurance Corporation proposes to revise part
345 of chapter III of title 12 of the Code of Federal Regulations to
read as follows:
PART 345--COMMUNITY REINVESTMENT
Subpart A--General
Sec.
345.01 Authority, purposes, and scope.
345.02 Effect of CRA performance on applications.
345.03 Definitions.
Subpart B--Qualifying Activities
345.04 Qualifying activities criteria.
345.05 Qualifying activities confirmation and illustrative list.
345.06 Qualifying activities quantification.
345.07 Qualifying activities value.
Subpart C--Assessment Area
345.08 Assessment area.
Subpart D--Performance Evaluations
345.09 Performance standards and ratings, in general.
345.10 CRA evaluation measure.
345.11 Retail lending distribution tests.
345.12 General performance standards and presumptive rating.
345.13 Small bank performance standards.
345.14 Consideration of performance context.
345.15 Discriminatory and other illegal credit practices.
345.16 Strategic plan.
345.17 Assigned ratings.
345.18 State/multistate metropolitan statistical area assigned
rating.
Subpart E--Data Collection, Recordkeeping, and Reporting
345.19 Data collection for banks evaluated under the general
performance standards in Sec.  345.12 or a strategic plan under
Sec.  34.16.
345.20 Retail domestic deposit data collection and recordkeeping for
small banks evaluated under the small bank performance standards in
Sec.  345.13.
345.21 Activity location.
345.22 Recordkeeping.
345.23 Reporting for banks evaluated under the general performance
standards in Sec.  345.12 or a strategic plan under Sec.  345.16.
345.24 Public disclosures.
345.25 Content and availability of public file.
345.26 Availability of planned evaluation schedule.
345.27 Public notice by banks.
Appendix A to Part 345--Small Bank Ratings
Appendix B to Part 345--Community Reinvestment Act Notice
    Authority: 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2908, 3103-3104, and 3108(a).
Subpart A--General
Sec.  345.01  Authority, purposes, and scope.
    (a) Authority. The authority for this part is 12 U.S.C. 1814-1817,
1819-1820, 1828, 1831u and 2901-2907, 3103-3104, and 3108(a).
    (b) Purposes. In enacting the Community Reinvestment Act (CRA), the
Congress required each appropriate Federal financial supervisory agency
to assess an institution's record of helping to meet the credit needs
of the local communities in which the institution is chartered,
consistent with the safe and sound operation of the institution, and to
take this record into account in the
[[Page 1253]]
agency's evaluation of an application for a deposit facility by the
institution. This part is intended to carry out the purposes of the CRA
by:
    (1) Establishing the framework and criteria by which the Federal
Deposit Insurance Corporation (FDIC) assesses a bank's record of
helping to meet the credit needs of its entire community, including
low- and moderate-income neighborhoods, consistent with the safe and
sound operation of the bank; and
    (2) Providing that the FDIC takes that record into account in
considering certain applications.
    (c) Scope--(1) General. This part applies to all insured State
nonmember banks, including insured State branches as described in
paragraph (c)(2) and any uninsured State branch that results from an
acquisition described in section 5(a)(8) of the International Banking
Act of 1978 (12 U.S.C. 3103(a)(8)).
    (2) Insured State branches. Insured State branches are branches of
a foreign bank established and operating under the laws of any State,
the deposits of which are insured in accordance with the provisions of
the Federal Deposit Insurance Act (FDIA). In the case of insured State
branches, references in this part to main office mean the principal
branch within the United States and the term branch or branches refers
to any insured State branch or branches located within the United
States. The assessment area of an insured State branch is the community
or communities located within the United States served by the branch as
described in Sec.  345.08.
    (3) Certain exempt banks. This part does not apply to banks that do
not perform commercial or retail banking services by granting credit or
offering credit-related products or services to the public in the
ordinary course of business, other than as incident to their
specialized operations and done on an accommodation basis. These banks
include banker's banks, as defined in 12 U.S.C. 24(Seventh), and banks
that engage only in one or more of the following activities: Providing
cash management controlled disbursement services or serving as
correspondent banks, trust companies, or clearing agents.
    (4) Compliance Dates--(i) Banks other than small banks--(A) Banks
that are not small banks must comply with the following requirements of
this part on the following dates:
    (1) One year after the effective date of the final rule for the
assessment area, data collection, and recordkeeping requirements in
Sec. Sec.  345.08, 345.19, and 345.22; and
    (2) Two years after the effective date of the final rule for the
reporting requirements in Sec.  345.23.
    (B) Banks that are not small banks must comply with the applicable
requirements of the other sections of this part after completing the
evaluation period that concludes immediately after the reporting
requirements compliance date in paragraph (c)(4)(i)(A)(2) of this
section, including any extensions approved by the FDIC.
    (ii) Small banks--(A) Small banks must comply with the assessment
area, data collection, and recordkeeping requirements in Sec. Sec.
345.08, 345.20, and 345.22 one year after the effective date of this
rule.
    (B) Small banks must comply with the applicable requirements of the
other sections of this part after completing the evaluation period that
concludes immediately after the compliance date in paragraph
(c)(4)(ii)(A) of this section, including any extensions approved by the
FDIC.
    (iii) Small banks that opt into the general performance standards
in Sec.  345.12 as of the effective date of this rule and banks that no
longer meet the small bank definition--(A) Small banks that opt into
the general performance standards in Sec.  345.12 as of the effective
date of this rule pursuant to Sec.  345.09(b) and banks that no longer
meet the small bank definition must comply with the following
requirements on the following dates:
    (1) Two years after the effective date of the final rule for the
assessment area, data collection, and recordkeeping requirements in
Sec. Sec.  345.08, 345.19, and 345.22; and
    (2) Three years after the effective date of the final rule for the
reporting requirements in Sec.  345.23.
    (B) Those banks must comply with the applicable requirements of the
other sections of this part after completing the evaluation period that
concludes immediately after the reporting requirements compliance date
in paragraph (c)(4)(iii)(A)(2) of this section, including any
extensions approved by the FDIC.
    (iv) Small banks that opt into the general performance standards in
Sec.  345.12 after the effective date of the final rule--(A) Small
banks that opt into the general performance standards in Sec.  345.12
after the effective date of the final rule pursuant to Sec.  345.09(b)
must comply with the following requirements on the following dates:
    (1) One year after the bank opts in for the assessment area, data
collection, and recordkeeping requirements in Sec. Sec.  345.08,
345.19, and 345.22; and
    (2) Two years after the bank opts in for the reporting requirements
in Sec.  345.23.
    (B) Those banks must comply with the applicable requirements of the
other sections of this part after completing the evaluation period that
concludes immediately after the reporting requirements compliance date
in paragraph (c)(4)(iv)(A)(2) of this section, including any extensions
approved by FDIC.
Sec.  345.02   Effect of CRA performance on applications.
    (a) CRA performance. Among other factors, the FDIC takes into
account the record of performance under the CRA of each applicant bank
in considering an application for:
    (1) The establishment of a domestic branch or other facility with
the ability to accept deposits;
    (2) The relocation of the bank's main office or a branch;
    (3) The merger, consolidation, acquisition of assets, or assumption
of liabilities; and
    (4) Deposit insurance for a newly chartered financial institution.
    (b) New financial institutions. A newly chartered financial
institution shall submit with its application for deposit insurance a
description of how it will meet its CRA objectives. The FDIC takes the
description into account in considering the application and may deny or
condition approval on that basis.
    (c) Interested parties. The FDIC takes into account any views
expressed by interested parties that are submitted in accordance with
the FDIC's procedures set forth in part 303 of this chapter in
considering CRA performance in an application listed in paragraphs (a)
and (b) of this section.
    (d) Denial or conditional approval of application. A bank's record
of performance may be the basis for denying or conditioning approval of
an application listed in paragraph (a) of this section.
    (e) Insured depository institution. For purposes of this section,
the term ``insured depository institution'' has the same meaning as
this term is given in 12 U.S.C. 1813.
Sec.  345.03   Definitions.
    For purposes of this part, the following definitions apply:
    Activity means a loan, investment, or service by a bank.
    Affiliate has the same meaning as this term is given in Regulation
W, 12 CFR 223.2(a) and (b) as of the effective date of this rule but
applies to member and non-member banks.
[[Page 1254]]
    Agencies means the Office of the Comptroller of the Currency and
the FDIC.
    Area median income means:
    (1) The median family income for the metropolitan statistical area,
if a person or census tract is located in a metropolitan statistical
area, or for the metropolitan division, if a person or census tract is
located in a metropolitan statistical area that has been subdivided
into metropolitan divisions; or
    (2) The statewide nonmetropolitan median family income, if a person
or census tract is located outside a metropolitan statistical area.
    Assessment area means a geographic area delineated in accordance
with Sec.  345.08.
    Average means the statistical mean.
    Bank means a State nonmember bank, as that term is defined in
section 3(e)(2) of the FDIA, as amended (12 U.S.C. 1813(e)(2)), with
Federally insured deposits, except as provided in Sec.  345.01(c). The
term bank also includes an insured State branch.
    Branch means a staffed banking facility authorized as a branch,
whether shared or unshared, including, for example, a mini-branch in a
grocery store or a branch operated in conjunction with any other local
business or non-profit organization. The term ``branch'' only includes
a ``domestic branch'' as that term is defined in section 3(o) of the
FDIA (12 U.S.C. 1813(o)).
    Call Report means Consolidated Reports of Condition and Income as
filed under 12 U.S.C. 161.
    Community Development Financial Institution has the same meaning as
this term is given in 12 U.S.C. 4702(5).
    Community development investment means a lawful investment,
membership share, deposit, legally-binding commitment to invest that is
reported on the Call Report, Schedule RC-L, or monetary or in-kind
donation that meets the criteria of Sec.  345.04(c).
    Community development loan means a loan, line of credit, or
contingent commitment to lend that meets the criteria of Sec.
345.04(c).
    Community development services means bank employee time spent
volunteering as a representative of the bank on activities that meet
the criteria of Sec.  345.04(c) or supporting activities that meet the
criteria of Sec.  345.04(c)(2), (11). A bank employee may receive
expense reimbursement for volunteer time related to the community
development activity.
    Compensation means the Bureau of Labor Statistics calculation of
the hourly wage for that type of work engaged in by a bank employee in
the course of conducting community development services.
    Consumer loan means a loan reported on the Call Report, Schedule
RC-C, Loans and Lease Financing Receivables, Part 1, Item 6, Loans to
individuals for household, family, and other personal expenditures,
which include the following product lines:
    (1) Credit card, which is an extension of credit to an individual
for household, family, and other personal expenditures arising from
credit cards;
    (2) Other revolving credit plan, which is an extension of credit to
an individual for household, family, and other personal expenditures
arising from prearranged overdraft plans and other revolving credit
plans not accessed by credit cards;
    (3) Automobile loan, which is a consumer loan extended for the
purpose of purchasing new and used passenger cars and other vehicles
such as minivans, vans, sport-utility vehicles, pickup trucks, and
similar light trucks for personal use; and
    (4) Other consumer loan, which is any other loan to an individual
for household, family, and other personal expenditures (other than
those that meet the definition of a ``loan secured by real estate'' and
other than those for purchasing or carrying securities), including low-
cost education loans, which is any private education loan, as defined
in section 140(a)(8) of the Truth in Lending Act (15 U.S.C. 1650(a)(8))
(including a loan under a state or local education loan program),
originated by the bank for a student at an ``institution of higher
education,'' as that term is generally defined in sections 101 and 102
of the Higher Education Act of 1965 (20 U.S.C. 1001 and 1002) and the
implementing regulations published by the U.S. Department of Education,
with interest rates and fees no greater than those of comparable
education loans offered directly by the U.S. Department of Education.
Such rates and fees are specified in section 455 of the Higher
Education Act of 1965 (20 U.S.C. 1087e).
    Contingent commitment to lend means a legally-binding commitment to
extend credit in instances where another bank initially funded, or
committed to fund, a project but cannot, for financial or legal
reasons, advance unanticipated additional funds necessary to complete
the project.
    Distressed area means a middle-income census tract identified by
the agencies that meets one or more of the following conditions:
    (1) An unemployment rate of at least 1.5 times the national
average,
    (2) A poverty rate of 20 percent or more, or
    (3) A population loss of 10 percent or more between the previous
and most recent decennial census or a net migration loss of five
percent or more over the five-year period preceding the most recent
census.
    Essential community facility means a public facility, including but
not limited to a school, library, park, hospital and health care
facility, and public safety facility.
    Essential infrastructure means:
    (1) Public infrastructure, including but not limited to public
roads, bridges, tunnels; and
    (2) Essential telecommunications infrastructure, mass transit,
water supply and distribution, utilities supply and distribution,
sewage treatment and collection, and industrial parks.
    Family farm has the same meaning as the term is given by the Farm
Service Agency of the U.S. Department of Agriculture in 7 CFR 761.2(b)
as of the effective date of this rule.
    Financing means permissible equity or debt facilities, such as
loans, lines of credit, bonds, private funds, securities, or other
permissible investments.
    High-cost area means any county in which the percentage of
households who have monthly housing costs greater than 30 percent of
their monthly income is greater than 40 percent.
    Home mortgage loan means a loan reported on the Call Report,
Schedule RC-C, Loans and Lease Financing Receivables, Part I,
specifically:
    (1) Item 1.a.(1) 1-4 family residential construction loans;
    (2) Item 1.c Loans secured by 1-4 family residential properties
(includes closed-end and open-end loans); or
    (3) Item 1.d Loans secured by multifamily (5 or more) residential
properties.
    Income levels are:
    (1) Low-income, which means an individual income that is less than
50 percent of the area median income, or a median family income that is
less than 50 percent in the case of a census tract.
    (2) Moderate-income, which means an individual income that is at
least 50 percent and less than 80 percent of the area median income, or
a median family income that is at least 50 percent and less than 80
percent in the case of a census tract.
    (3) Middle-income, which means an individual income that is at
least 80 percent and less than 120 percent of the area median income,
or a median family income that is at least 80 percent and less than 120
percent in the case of a census tract.
    (4) Upper-income, which means an individual income that is 120
percent or
[[Page 1255]]
more of the area median income, or a median family income that is 120
percent or more in the case of a census tract.
    Indian country has the same meaning as this term is given in 18
U.S.C. 1151.
    Insured State branches mean the branches of a foreign bank
established and operating under the laws of any State, the deposits of
which are insured in accordance with the provisions of the FDIA. In the
case of insured State branches, references in this part to main office
mean the principal branch within the United States and the term branch
or branches refers to any insured State branch or branches located
within the United States.
    Low-income credit union has the same meaning as this term is given
in 12 CFR 701.34.
    Major retail lending product line means a bank's retail lending
product line that composes at least 15 percent of the bank-level dollar
volume of total retail loan originations during the evaluation period.
    Metropolitan division has the same meaning as this term is given by
the Director of the Office of Management and Budget.
    Metropolitan statistical area has the same meaning as this term is
given by the Director of the Office of Management and Budget.
    Military bank means a bank whose business predominately consists of
serving the needs of military personnel who serve or have served in the
armed forces (including the U.S. Army, Navy, Marine Corp., Air Force,
and Coast Guard) or dependents of military personnel. A bank whose
business predominantly consists of serving the needs of military
personnel or their dependents means a bank whose most important
customer group is military personnel or their dependents.
    Minority depository institution means a depository institution as
defined in 12 U.S.C. 2907(b)(1).
    Monetary or in-kind donation means:
    (1) A grant, monetary contribution, or monetary donation, or
    (2) A contribution of goods, commodities, or other non-monetary
resources.
    Non-branch deposit-taking facility means a banking facility other
than a branch owned or operated by, or operated exclusively for, the
bank that is authorized to take deposits that is located in any state
or territory of the United States of America.
    Nonmetropolitan area means any area that is not located in a
metropolitan statistical area.
    Partially benefits means 50 percent or less of the dollar value of
the activity or of the individuals or census tracts served by the
activity.
    Primarily benefits means:
    (1) Greater than 50 percent of the dollar value of the activity or
of the individuals or census tracts served by the activity; or
    (2) The express, bona fide intent, purpose, or mandate of the
activity as stated, for example, in a prospectus, loan proposal, or
community action plan.
    Qualifying activity means an activity that helps meet the credit
needs of a bank's entire community, including low- and moderate-income
individuals and communities, in accordance with Sec.  345.04.
    Qualifying loan means a retail loan that meets the criteria in
Sec.  345.04(b) or a community development loan that meets the criteria
in Sec.  345.04(c).
    Retail domestic deposit means a ``deposit'' as defined in section
3(l) of the FDIA (12 U.S.C. 1813(l)) and as reported on Schedule RC-E,
item 1, of the Call Report that is held in the United States and is
provided by an individual, partnership, or corporation other than a
deposit that is obtained, directly or indirectly, from or through the
mediation or assistance of a deposit broker as that term is defined in
section 29 of the FDIA (12 U.S.C. 1831f(g)).
    Retail loan means a home mortgage loan, small loan to a business,
small loan to a farm, or consumer loan.
    Retail lending product line means a:
    (1) Home mortgage loan product line, which includes all home
mortgage loans;
    (2) Small loan to a business product line, which includes all small
loans to businesses;
    (3) Small loan to a farm product line, which includes all small
loans to farms; or
    (4) Consumer lending product line, which includes:
    (ii) An automobile loan product line;
    (iii) A credit card product line;
    (iv) An other revolving credit plan product line; or
    (v) An other consumer loan product line.
    Small bank--(1) Definition. Small bank means a bank that:
    (i) Had assets of $500 million or less in each of the previous four
calendar quarters; or
    (ii) Was a small bank as of the close of the calendar quarter
immediately preceding the close of the last calendar quarter and did
not have assets of greater than $500 million as of the close of each of
the past four calendar quarters.
    (2) Adjustment. The dollar figures in this definition shall be
adjusted annually and published by the FDIC, based on the year-to-year
change in the average of the Consumer Price Index for Urban Wage
Earners and Clerical Workers, not seasonally adjusted, for each twelve-
month period ending in November, with rounding to the nearest $100,000.
    Small business means a business that has gross annual revenues of
no greater than $2 million. The FDIC will annually adjust the $2
million threshold for inflation, and the adjustment to the threshold
will be made publicly available.
    Small farm means a farm with gross annual revenues of no greater
than $2 million. The FDIC will annually adjust the $2 million threshold
for inflation, and the adjustment to the threshold will be made
publicly available.
    Small loan to a business means a loan reported on the Call Report,
Schedule RC-C, Loans and Lease Financing Receivables, Part 1, Item 1.e,
Secured by nonfarm nonresidential properties, or Item 4, Commercial and
industrial loans, and of no greater than $2 million. The FDIC will
annually adjust the $2 million threshold for inflation, and the
adjustment to the threshold will be made publicly available.
    Small loan to a farm means a loan reported on the Call Report,
Schedule RC-C, Loans and Lease Financing Receivables, Part 1, Item 1.b,
Secured by farmland, or Item 3, Loans to finance agricultural
production and other loans to farmers, and of no greater than $2
million. The FDIC will annually adjust the $2 million threshold for
inflation, and the adjustment to the threshold will be made publicly
available.
    Underserved area means a middle-income census tract:
    (1) Identified by the agencies as meeting the criteria for
population size, density, and dispersion that indicate the area's
population is sufficiently small, thin, and distant from a population
center that the tract is likely to have difficulty financing the fixed
costs of meeting essential community needs. The agencies will use as
the basis for these designations the ``urban influence codes,''
numbered ``7,'' ``10,'' ``11,'' and ``12,'' maintained by the Economic
Research Service of the U.S. Department of Agriculture; or
    (2) Identified by the agencies as:
    (i) Not having a branch of any bank within:
    (A) 2 miles of the center of the census tract if it is an urban
census tract, as defined by the Federal Financial Institutions
Examination Council Census data;
    (B) 5 miles of the center of the census tract if it is a mixed
census tract, as
[[Page 1256]]
defined by the Federal Financial Institutions Examination Council
Census data;
    (C) 10 miles of the center of the census tract if it is a rural
census tract, as defined by the Federal Financial Institutions
Examination Council Census data; or
    (D) 5 miles of the center of the census tract if the census tract
is an island area, as defined by the Federal Financial Institutions
Examination Council Census data; and
    (ii) Not having any branch within the census tract.
    Women's depository institution means a depository institution as
defined in 12 U.S.C. 2907(b)(2).
Subpart B--Qualifying Activities
Sec.  345.04   Qualifying activities criteria.
    (a) General. Retail loans, community development loans, community
development investments, and community development services that help
meet the credit needs of a bank's entire community, including low- and
moderate-income communities, are qualifying activities if they meet the
criteria in this section at the time the activity is originated, made,
or conducted. If the activity is subsequently purchased by another
bank, it is a qualifying activity if it meets the criteria in this
section at the time of purchase.
    (b) Retail loans. A home mortgage loan, small loan to a business,
small loan to a farm, or consumer loan is a qualifying activity if it
is:
    (1) Provided to a:
    (i) Low- or moderate-income individual or family;
    (ii) Small business; or
    (iii) Small farm;
    (2) Located in Indian country;
    (3) A small loan to a business located in a low- or moderate-income
census tract; or
    (4) A small loan to a farm located in a low- or moderate-income
census tract.
    (c) Community development loans, community development investments,
and community development services. A community development loan,
community development investment, or community development service is a
qualifying activity if it provides financing for or supports:
    (1) Affordable housing, which means:
    (i) Rental housing:
    (A) That is likely to partially or primarily benefit low- or
moderate-income individuals or families as demonstrated by median rents
that do not and are not projected at the time of the transaction to
exceed 30 percent of 80 percent of the area median income;
    (B) That partially or primarily benefits low- or moderate-income
individuals or families as demonstrated by an affordable housing set-
aside required by a federal, state, local, or tribal government;
    (C) That is undertaken in conjunction with an explicit federal,
state, local, or tribal government affordable housing program for low-
or moderate-income individuals or families;
    (D) That partially or primarily benefits middle-income individuals
or families in high-cost areas as demonstrated by an affordable housing
set-aside required by a federal, state, local, or tribal government; or
    (E) That is undertaken in conjunction with an explicit federal,
state, local, or tribal government affordable housing program for
middle-income individuals or families in high-cost areas; or
    (ii) Owner-occupied housing purchased, refinanced, or improved by
low- or moderate-income individuals or families, except for home
mortgage loans provided directly to individuals or families;
    (2) Another bank's community development loan, community
development investment, or community development service;
    (3) Businesses or Farms that meet the size-eligibility standards of
the Small Business Administration Certified Development Company, as
that term is defined in 13 CFR 120.10, or the Small Business Investment
Company, as described 13 CFR part 107, by providing technical
assistance and supportive services, such as shared space, technology,
or administrative assistance through an intermediary;
    (4) Community support services which means activities, such as
child care, education, health services, and housing services, that
partially or primarily serve or assist low- or moderate-income
individuals or families;
    (5) Essential community facilities that partially or primarily
benefit or serve:
    (i) Low- or moderate-income individuals or families; or
    (ii) Low- or moderate-income census tracts, distressed areas,
underserved areas, disaster areas consistent with a disaster recovery
plan, or Indian country;
    (6) Essential infrastructure that benefits or serves:
    (i) Low- or moderate-income individuals or families; or
    (ii) Low- or moderate-income census tracts, distressed areas,
underserved areas, disaster areas consistent with a disaster recovery
plan, or Indian country;
    (7) A family farm's:
    (i) Purchase or lease of farm land, equipment, and other farm-
related inputs,
    (ii) Receipt of technical assistance and supportive services, such
as shared space, technology, or administrative assistance through an
intermediary; or
    (iii) Sale and trade of family farm products;
    (8) Federal, state, local, or tribal government programs, projects,
or initiatives that:
    (i) Partially or primarily benefit low- or moderate-income
individuals or families;
    (ii) Partially or primarily benefit small businesses or small farms
as those terms are defined in the programs, projects or initiatives; or
    (iii) Are consistent with a bona fide government revitalization,
stabilization, or recovery plan for a low- or moderate-income census
tract; a distressed area; an underserved area; a disaster area; or
Indian country;
    (9) Financial literacy programs or education or homebuyer
counseling;
    (10) Owner-occupied and rental housing development, construction,
rehabilitation, improvement, or maintenance in Indian country;
    (11) Qualified opportunity funds, as defined in 26 U.S.C. 1400Z-
2(d)(1), that benefit low- or moderate-income qualified opportunity
zones, as defined in 26 U.S.C. 1400Z-1(a);
    (12) A Small Business Administration Certified Development Company,
as that term is defined in 13 CFR 120.10, a Small Business Investment
Company, as described 13 CFR part 107, a New Markets Venture Capital
company, as described in 13 CFR part 108, a qualified Community
Development Entity, as defined in 26 CFR 45D(c), or a U.S. Department
of Agriculture Rural Business Investment Company, as defined in 7 CFR
4290.50; or
    (13) Ventures undertaken, including capital investments and loan
participations, by a bank in cooperation with a minority depository
institution, women's depository institution, Community Development
Financial Institution, or low-income credit union, if the activity
helps to meet the credit needs of local communities in which such
institutions are chartered, including activities that indirectly help
to meet community credit needs by promoting the sustainability and
profitability of those institutions and credit unions.
Sec.  345.05  Qualifying activities confirmation and illustrative list.
    (a) Qualifying activities list. The FDIC maintains a publicly
available illustrative list on the FDIC's website of
[[Page 1257]]
non-exhaustive examples of qualifying activities that meet and
activities that do not meet the criteria in Sec.  345.04.
    (b) Confirmation of a qualifying activity. A bank may request that
the FDIC confirm that an activity meets the criteria in Sec.  345.04
and is a qualifying activity in accordance with paragraph (c) of this
section.
    (1) When the FDIC confirms that an activity is consistent with the
criteria in Sec.  345.04, the FDIC will notify the requestor and may
add this activity to the list of activities that meet the qualifying
activities criteria described in paragraph (a) of this section,
incorporating any conditions imposed, if applicable.
    (2) When the FDIC determines that an activity is not consistent
with the criteria in Sec.  345.04, the FDIC will notify the requestor
and may add this activity to the list of activities that do not meet
the qualifying activities criteria described in paragraph (a) of this
section.
    (c) Process--(1) A bank may request that the FDIC confirm that an
activity is a qualifying activity by submitting a complete Qualifying
Activity Confirmation Request Form available on the FDIC's website.
    (2) In responding to a confirmation request that an activity is
consistent with the criteria in Sec.  345.04, the FDIC will consider:
    (i) The information on the Qualifying Activity Confirmation Request
Form;
    (ii) Whether the activity is consistent with the safe and sound
operation of the bank; and
    (iii) Any other information the FDIC deems relevant.
    (3) The FDIC may impose conditions on its confirmation to ensure
that an activity is consistent with the criteria in Sec.  345.04.
    (4) An activity is confirmed as a qualifying activity if the bank
is not informed of an FDIC objection within 6 months of submission of a
complete Qualifying Activity Confirmation Request Form.
    (d) Modifying the qualifying activities list. In addition to
updating the list in paragraph (a) of this section on an ongoing basis
in response to requests for confirmation described in paragraph (b) of
this section, the FDIC will publish the qualifying activities list no
less frequently than every three years for notice and comment to
determine whether the list should change. If the FDIC determines that a
qualifying loan or community development investment no longer meets the
criteria in Sec.  345.04, that loan or community development investment
will not be considered a qualifying activity for any subsequent
purchasers.
Sec.  345.06   Qualifying activities quantification.
    (a) Community development service quantification. The dollar value
of a community development service is the compensation of for the
community development service multiplied by the number of hours the
employee spent performing the service, as adjusted by paragraph (e) of
this section.
    (b) In-kind donation quantification. The dollar value of an in-kind
donation is the fair market value of the donation, as adjusted by
paragraph (e) of this section.
    (c) Monetary donation quantification. The dollar value of a
monetary donation is the actual dollar value of the donation, as
adjusted by paragraph (e) of this section.
    (d) Qualifying loan and other community development investment
quantification. The dollar value of a qualifying loan or a community
development investment not included in paragraph (b) or (c) of this
section, is:
    (1) Except for qualifying loans in paragraph (d)(2) of this
section, the average of the dollar value, as of the close of business
on the last day of the month, for each month the loan or investment is
on-balance sheet, of:
    (i) The outstanding balance of a loan or investment, as adjusted by
paragraph (e) of this section;
    (ii) Any legally-binding commitment to invest, as adjusted by
paragraph (e) of this section; and
    (iii) The allowance for credit losses on off balance sheet credit
exposures for contingent commitments to lend, as calculated in
accordance with the instructions to the Call Report, Schedule RC-G, as
adjusted by paragraph (e) of this section; or
    (2) For qualifying retail loans sold within 90 days of origination,
25 percent of the aggregate dollar value of the loan at origination, as
adjusted by paragraph (e) of this section.
    (e) Portion of qualifying activities that partially benefit. The
dollar value of a qualifying activity that partially benefits, as
defined in Sec.  345.03, is calculated by multiplying the percentage of
the partial benefit by the full dollar value of the qualifying activity
quantified under paragraphs (a)-(d) of this section.
Sec.  345.07   Qualifying activities value.
    (a) Bank-level qualifying activities value. A bank evaluated under
Sec.  345.12 calculates its bank-level qualifying activities value
annually based on the dollar value of all qualifying activities
originated, made, purchased, or performed on behalf of the bank and not
included in the bank-level qualifying activities value of another bank
subject to this part or part 25. The qualifying activities value equals
the sum, during a given annual period, of:
    (1) The quantified dollar value of qualifying loans and community
development investments, as adjusted in paragraph (b) of this section;
and
    (2) The aggregate:
    (i) Quantified dollar value of community development services
conducted, as adjusted in paragraph (b) of this section;
    (ii) Quantified dollar value of in-kind donations made, as adjusted
in paragraph (b) of this section; and
    (iii) Monetary donations made, as adjusted in paragraph (b) of this
section.
    (b) Multipliers. The dollar value of the following qualifying
activities will be adjusted by multiplying the actual or quantified
dollar value by 2.
    (1) Activities provided to or that support Community Development
Financial Institutions, except activities related to mortgage-backed
securities;
    (2) Other community development investments, except community
development investments in mortgage-backed securities and municipal
bonds; and
    (3) Other affordable housing-related community development loans.
    (c) Assessment area qualifying activities value. A bank evaluated
under Sec.  345.12 calculates its assessment area qualifying activities
value for each assessment area by using the process described in
paragraph (a) of this section for qualifying activities located in the
assessment area.
Subpart C--Assessment Area
Sec.  345.08  Assessment area.
    (a) General. A bank must delineate one or more assessment areas
within which the FDIC evaluates the bank's record of helping to meet
the credit needs of its community. The FDIC reviews the delineation for
compliance with the requirements of this section. Unless pursuant to an
approved application covered under Sec.  345.02(a)(3) for a merger or
consolidation with an insured depository institution, an assessment
area delineation can only change once during an evaluation period and
must not change within the annual period used to determine an
assessment area CRA evaluation measure under Sec.  345.10(c).
    (b) Facility-based assessment area(s)--(1) A bank must delineate an
assessment area encompassing each location where the bank maintains a
[[Page 1258]]
main office, a branch, or a non-branch deposit-taking facility as well
as the surrounding locations in which the bank has originated or
purchased a substantial portion of its qualifying retail loans.
Assessment areas delineated under this paragraph may contain one or
more of these facilities.
    (2) A facility-based assessment area must be delineated to consist
of:
    (i) One whole metropolitan statistical area (using the metropolitan
statistical area boundaries that were in effect as of January 1 of the
calendar year in which the delineation is made);
    (ii) The whole nonmetropolitan area of a state;
    (iii) One or more whole, contiguous metropolitan divisions in a
single metropolitan statistical area (using the metropolitan division
boundaries that were in effect as of January 1 of the calendar year in
which the delineation is made); or
    (iv) One or more whole, contiguous counties or county equivalents
in a single metropolitan statistical area or nonmetropolitan area.
    (3) A bank may delineate its facility-based assessment area(s) in
the smallest geographic area where it maintains a main office, branch,
or non-branch deposit-taking facility, but may delineate a larger
assessment area that includes these locations, as provided in paragraph
(b)(2) of this section.
    (4) A facility-based assessment area may not extend beyond a
metropolitan statistical area or state boundary unless the assessment
area is located in a multistate metropolitan statistical area. If a
bank serves a geographic area that extends beyond a state boundary, the
bank must delineate separate assessment areas for the areas in each
state. If a bank serves a geographic area that extends beyond a
metropolitan statistical area boundary, the bank must delineate
separate assessment areas for the areas inside and outside the
metropolitan statistical area.
    (c) Deposit-based assessment area(s)--(1) A bank that receives 50
percent or more of its retail domestic deposits from geographic areas
outside of its facility-based assessment areas must delineate separate,
non-overlapping assessment areas in the smallest geographic area where
it receives 5 percent or more of its retail domestic deposits.
    (2) A deposit-based assessment area must be delineated to consist
of:
    (i) One whole state;
    (ii) One whole metropolitan statistical area (using the
metropolitan statistical area boundaries that were in effect as of
January 1 of the calendar year in which the delineation is made);
    (iii) The whole nonmetropolitan area of a state;
    (iv) One or more whole, contiguous metropolitan divisions in a
single metropolitan statistical area (using the metropolitan division
boundaries that were in effect as of January 1 of the calendar year in
which the delineation is made);
    (v) The remaining geographic area of a state, metropolitan
statistical area, nonmetropolitan area, or metropolitan division other
than where it has a facility-based assessment area; or
    (vi) One or more whole, contiguous counties or county equivalents
in a single metropolitan statistical area or nonmetropolitan area.
    (d) Limitations on delineation of assessment areas. A bank's
assessment areas must not:
    (1) Reflect illegal discrimination; or
    (2) Arbitrarily exclude low- or moderate-income geographies, taking
into account the bank's size and financial condition.
    (e) Military banks. Notwithstanding the requirements of this
section, a military bank's assessment area will consist of the entire
United States of America and its territories. A military bank will only
be evaluated based on its entire deposit customer base at the bank
level under Sec.  345.12.
    (f) Banks evaluated under strategic plans. A bank evaluated under a
strategic plan will delineate its assessment area(s) in accordance with
the requirements of Sec.  345.16(g)(2).
    (g) Use of assessment area(s). The FDIC uses the assessment area(s)
delineated by a bank in its evaluation of the bank's CRA performance
unless the FDIC determines that the assessment area(s) do not comply
with the requirements of this section.
Subpart D--Performance Evaluations
Sec.  345.09  Performance standards and ratings, in general.
    (a) Performance standards. The FDIC assesses the CRA performance of
a bank in an examination as follows:
    (1) General performance standards--(i) The FDIC assesses the CRA
performance of a bank other than banks described in paragraphs (a)(2)
and (a)(3) of this section based on the bank's application of the
general performance standards and determination of its presumptive
ratings under Sec.  345.12.
    (ii) The FDIC determines the assigned ratings for a bank evaluated
under Sec.  345.12 as provided in Sec.  345.17.
    (iii) The FDIC determines the state or multistate metropolitan
statistical area ratings for a bank evaluated under Sec.  345.12 as
provided in Sec.  345.18.
    (2) Small bank performance standards--(i) The FDIC applies the
small bank performance standards as provided in Sec.  345.13 in
evaluating the performance of a small bank, unless the bank is
evaluated under an approved strategic plan as described under (a)(3) of
this section or elects to opt in to the general performance standards
under paragraph (b) of this section.
    (ii) The FDIC assigns a small bank evaluated under the small bank
performance standards in Sec.  345.13 lending test and bank-level
ratings as provided for in Appendix A of this part.
    (3) Strategic plan. The FDIC evaluates the performance of a bank
under a strategic plan if the bank submits, and the FDIC approves, a
strategic plan as provided in Sec.  345.16.
    (b) General performance standards opt in. A small bank may elect to
opt in to be evaluated under the general performance standards
described in paragraph (a)(1) of this section and this election must
occur at least six months before the start of a bank's next evaluation
period. Small banks that elect to be evaluated under the general
performance standards must collect, maintain, and report the data
required for other banks under Sec. Sec.  345.19, 345.22, and 345.23.
Once a small bank has elected to opt in, it must complete at least one
evaluation period under the general performance standards and may elect
no more than once to opt out of the general performance standards and
must do so six months before the start of its next evaluation period.
Small banks that opt out will revert to being evaluated according to
the small bank performance standards as provided in Sec.  345.13 in
evaluating the performance of a small bank, unless the bank is
evaluated under an approved strategic plan as described under (a)(3) of
this section.
    (c) Safe and sound operations. This part and the CRA do not require
a bank to make loans or investments or to provide services that are
inconsistent with safe and sound operations. To the contrary, the FDIC
anticipates banks can meet the standards of this part with safe and
sound loans, investments, and services on which the banks expect to
make a profit. Banks are permitted and encouraged to develop and apply
flexible underwriting standards for loans that benefit low- or
moderate-income geographies or individuals, only if consistent with
safe and sound operations.
Sec.  345.10   CRA evaluation measure.
    (a) CRA evaluation measure. A bank evaluated as described in Sec.
345.12 will determine its bank-level and assessment
[[Page 1259]]
area CRA evaluation measures annually as part of its CRA performance
evaluation.
    (b) Determination of the bank-level CRA evaluation measure. A
bank's bank-level CRA evaluation measure is the sum of:
    (1) The bank's annual bank-level qualifying activities values
calculated under Sec.  345.07(a) divided by the average quarterly value
of the bank's retail domestic deposits as of the close of business on
the last day of each quarter for the same period used to calculate the
annual qualifying activities value; and
    (2) The number of the bank's branches located in low- or moderate-
income census tracts, distressed areas, underserved areas, and Indian
country divided by its total number of branches as of the close of
business on the last day of the same period used to calculate the
annual qualifying activities value multiplied by .01.
    (c) Determination of the assessment area CRA evaluation measure. A
bank's assessment area CRA evaluation measure is determined in each
assessment area and is the sum of:
    (1) The bank's annual assessment area qualifying activities value
calculated under Sec.  345.07(c); divided by the average quarterly
value of the bank's assessment area retail domestic deposits as of the
close of business on the last day of each quarter for the same period
used to calculate the annual assessment area qualifying activities
value; and
    (2) The number of the bank's branches located in low- or moderate-
income census tracts in the assessment area divided by its total number
of branches in the assessment area as of the close of business on the
last day of the same period used to calculate the annual assessment
area qualifying activities value multiplied by .01.
    (d) Average CRA evaluation measures. For each evaluation period, a
bank will calculate the average of its:
    (1) Annual bank-level CRA evaluation measures for each year in the
evaluation period; and
    (2) Annual assessment area CRA evaluation measures for each year in
the evaluation period, separately for each assessment area.
Sec.  345.11  Retail lending distribution tests.
    (a) General. In each assessment area, a bank evaluated as described
in Sec.  345.12 will apply a:
    (1) Geographic distribution test for its small loan to a business
product line or small loan to a farm product line if those product
lines are major retail lending product lines with 20 or more
originations in the assessment area during the evaluation period; and
    (2) Borrower distribution test for each major retail lending
product line with 20 or more originations in the assessment area during
the evaluation period.
    (b) Geographic distribution test--(1) Small loan to a business
product line. To pass the geographic distribution test for the small
loan to a business product line, a bank's percentage of small loans to
businesses in low- or moderate-income census tracts originated during
the evaluation period in the assessment area must meet or exceed the
threshold established for either the associated geographic demographic
comparator or the associated geographic peer comparator.
    (i) Geographic demographic comparator threshold. The geographic
demographic comparator threshold is 55 percent of the percentage of
businesses in low- and moderate-income census tracts in the assessment
area.
    (ii) Geographic peer comparator threshold. The geographic peer
comparator threshold is 65 percent of the percentage of small loans to
businesses in low- and moderate-income census tracts originated by all
banks evaluated under the general performance standards in Sec.  345.12
in the assessment area.
    (2) Small loan to a farm product line. To pass the geographic
distribution test for the small loan to a farm product line, a bank's
percentage of small loans to farms in low- or moderate-income census
tracts originated during the evaluation period in the assessment area
must meet or exceed the threshold established for either the associated
geographic demographic comparator or the associated geographic peer
comparator.
    (i) Geographic demographic comparator threshold. The geographic
demographic comparator threshold is 55 percent of the percentage of
farms in low- and moderate-income census tracts in the assessment area.
    (ii) Geographic peer comparator threshold. The geographic peer
comparator threshold is 65 percent of the percentage of small loans to
farms in low- and moderate-income census tracts originated by all banks
evaluated under the general performance standards in Sec.  345.12 in
the assessment area.
    (c) Borrower distribution test--(1) Home mortgage lending product
line. To pass the borrower distribution test for the home mortgage
lending product line, a bank's percentage of home mortgage loans to
low- and moderate-income individuals and families originated during the
evaluation period in the assessment area must meet or exceed the
threshold established for either the associated borrower demographic
comparator or the associated borrower peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
low- and moderate-income families in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of home mortgage
loans to low- or moderate-income individuals and families originated by
all banks evaluated under the general performance standards in Sec.
345.12 in the assessment area.
    (2) Consumer lending product line. To pass the borrower
distribution test for a consumer lending product line, a bank's
percentage of consumer loans to low- and moderate-income individuals
and families originated during the evaluation period in the assessment
area must meet or exceed the threshold established for either the
associated demographic borrower comparator or the associated
demographic peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
low- and moderate-income individuals in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of consumer loans
to low- or moderate-income individuals and families originated by all
banks evaluated under the general performance standards in Sec.  345.12
in the assessment area.
    (3) Small loan to a business product line. To pass the borrower
distribution test for the small loan to a business product line, a
bank's percentage of small loans to businesses provided to small
businesses originated during the evaluation period in the assessment
area must meet or exceed the threshold established for either the
associated demographic borrower comparator or the associated
demographic peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
small businesses in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of small loans to
businesses provided to small businesses from all banks evaluated under
the general performance standards in Sec.  345.12 in the assessment
area.
[[Page 1260]]
    (4) Small loan to a farm product line. To pass the borrower
distribution test for the small loan to a farm product line, a bank's
percentage of small loans to farms provided to small farms originated
during the evaluation period in the assessment area must meet or exceed
the thresholds established for either the associated demographic
borrower comparator or the associated demographic peer comparator.
    (i) Borrower demographic comparator threshold. The borrower
demographic comparator threshold is 55 percent of the percentage of
small farms in the assessment area.
    (ii) Borrower peer comparator threshold. The demographic peer
comparator threshold is 65 percent of the percentage of small loans to
farms provided to small farms from all banks evaluated under the
general performance standards in Sec.  345.12 in the assessment area.
Sec.  345.12  General performance standards and presumptive rating.
    (a) General. The bank-level presumptive rating and assessment area
presumptive rating(s) for banks assessed under this section are
determined by evaluating whether a bank has met all the performance
standards associated with a given rating category, at the bank level
and in each assessment area. A bank will use the performance standards
in effect on the first day of its evaluation period for the duration of
its evaluation period, unless the bank elects to use performance
standards published later during the evaluation period. If the bank
elects to use a later-published performance standard, that performance
standard will apply during the entire evaluation period.
    (b) Performance standards adjustments. The agencies will
periodically adjust the performance standards.
    (1) Factors considered. When adjusting the performance standards,
the agencies will consider factors such as the level of qualifying
activities conducted by all banks, market conditions, and unmet needs
and opportunities.
    (2) Public notice and comment. The agencies will provide for a
public notice and comment period on any proposed adjustments prior to
finalizing the adjustments.
    (c) Bank-level performance standards--(1) Outstanding. The bank-
level outstanding performance standards are:
    (i) CRA evaluation measure. The average of the bank's bank-level
CRA evaluation measures during the evaluation period, expressed as a
percentage, must meet or exceed 11 percent;
    (ii) Assessment area ratings. The bank received an assigned rating
of outstanding in a significant portion of its assessment areas and in
those assessment areas where it holds a significant amount of deposits;
and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments
during the evaluation period, as valued in Sec.  345.07, divided by the
average quarterly value of the bank's retail domestic deposits as of
the close of business on the last day of each quarter of the evaluation
period, must meet or exceed 2 percent.
    (2) Satisfactory. The bank-level satisfactory performance standards
are:
    (i) CRA evaluation measure. The average of the bank's bank-level
CRA evaluation measures during the evaluation period, expressed as a
percentage, must meet or exceed 6 percent;
    (ii) Assessment area ratings. The bank received at least an
assigned rating of satisfactory in a significant portion of its
assessment areas and in those assessment areas where it holds a
significant amount of deposits; and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments
during the evaluation period, as valued in Sec.  345.07, divided by the
average quarterly value of the bank's retail domestic deposits as of
the close of business on the last day of each quarter of the evaluation
period, must meet or exceed 2 percent.
    (3) Needs to improve. The bank-level needs to improve performance
standard is an average bank-level CRA evaluation measure during the
evaluation period, expressed as a percentage, that meets or exceeds 3
percent.
    (4) Substantial noncompliance. The bank-level substantial
noncompliance standard is an average bank-level CRA evaluation measure
during the evaluation period, expressed as a percentage, that does not
meet or exceed 3 percent.
    (d) Assessment area performance standards--(1) Outstanding. The
assessment area outstanding performance standards are:
    (i) Retail lending distribution tests. The bank must pass the
geographic and borrower distribution tests for its major retail lending
product lines evaluated in Sec.  345.11;
    (ii) CRA evaluation measure. The assessment area average CRA
evaluation measure during the evaluation period, expressed as a
percentage, must meet or exceed 11 percent; and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments in
the assessment area during the evaluation period, as valued in Sec.
345.07, divided by the average quarterly value of the bank's assessment
area retail domestic deposits as of the close of business on the last
day of each quarter of the evaluation period, must meet or exceed 2
percent.
    (2) Satisfactory. The assessment area satisfactory performance
standards are:
    (i) Retail lending distribution tests. The bank must pass both the
geographic and borrower distribution tests for all retail lending
product lines evaluated in Sec.  345.11;
    (ii) CRA evaluation measure. The assessment area average CRA
evaluation measure during the evaluation period, expressed as a
percentage, must meet or exceed 6 percent; and
    (iii) Community development minimum. The quantified value of
community development loans and community development investments in
the assessment area during the evaluation period, as valued in Sec.
345.07, divided by the average quarterly value of the bank's assessment
area retail domestic deposits as of the close of business on the last
day of each quarter of the evaluation period, must meet or exceed 2
percent.
    (3) Needs to improve. The assessment area needs to improve
performance standard is an assessment area average CRA evaluation
measure during the evaluation period, expressed as a percentage, that
must meet or exceed 3 percent.
    (4) Substantial noncompliance. The assessment area substantial
noncompliance performance standard is an assessment area average CRA
evaluation measure during the evaluation period, expressed as a
percentage, that does not meet or exceed 3 percent.
Sec.  345.13  Small bank performance standards.
    (a) Performance lending test criteria. The FDIC evaluates the
record of a small bank of helping to meet the credit needs of its
assessment area(s) pursuant to the following criteria:
    (1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation, and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets, community
development loans, or community development investments;
[[Page 1261]]
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
    (3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's loans; and
    (5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in helping to meet credit
needs in its assessment area(s).
    (b) Small bank performance rating. The FDIC assesses the
performance of a small bank evaluated under this section as provided in
appendix A of this part.
Sec.  345.14  Consideration of performance context.
    (a) General. Performance context is used to assess how the factors
in paragraph (b) of this section affect a bank's capacity and
opportunity to meet the performance standards described in Sec. Sec.
345.12, 345.13, or 345.16. Based on that assessment, the FDIC may
adjust:
    (1) The assessment area and bank-level presumptive ratings in Sec.
345.12; or
    (2) The small bank lending test and bank-level ratings as described
in appendix A.
    (b) Performance context factors. In assessing performance context,
the FDIC considers and documents the effect of the following factors
when determining the assigned rating:
    (1) The bank's explanation of how its capacity to meet the
performance standards described in Sec. Sec.  345.12, 345.13, or 345.16
was affected by:
    (i) The bank's product offerings and business strategy;
    (ii) The bank's unique constraints, such as its financial
condition, safety and soundness limitations, or other factors;
    (iii) The innovativeness, complexity, and flexibility of the bank's
qualifying activities;
    (iv) The bank's development of business infrastructure and staffing
to support the purpose of this part; and
    (v) The responsiveness of the bank's qualifying activities to the
needs of the community;
    (2) The bank's explanation of how its opportunity to engage in
qualifying activities was affected by:
    (i) The demand for qualifying activities, including credit needs
and market opportunities identified in a Federal Home Loan Bank
Targeted Community Lending Plan provided for in 12 CFR 1290.6(a)(5), as
applicable;
    (ii) The demand for retail loans in low- or moderate-income census
tracts; and
    (iii) Demographic factors (e.g., housing costs, unemployment rates
variation);
    (3) The bank's competitive environment, as demonstrated by peer
performance.
    (4) Any written comments about assessment area needs and
opportunities submitted to the bank or the FDIC; and
    (5) Any other information deemed relevant by the FDIC.
    (c) Form. Banks other than small banks must submit the information
in paragraph (b) of this section on the performance context form
available on the FDIC's website.
Sec.  345.15  Discriminatory and other illegal credit practices.
    (a) Evidence of discriminatory or other illegal credit practices. A
bank's CRA performance is adversely affected by evidence of
discriminatory or other illegal credit practices. In assessing a bank's
CRA performance, the FDIC's evaluation will consider evidence of
discriminatory or other illegal credit practices including but not
limited to:
    (1) Discrimination against applicants on a prohibited basis in
violation, for example, of the Equal Credit Opportunity Act or the Fair
Housing Act;
    (2) Violations of the Home Ownership and Equity Protection Act;
    (3) Violations of section 5 of the Federal Trade Commission Act;
    (4) Violations of section 8 of the Real Estate Settlement
Procedures Act;
    (5) Violations of the Truth in Lending Act provisions regarding a
consumer's right of rescission;
    (6) Violations of the Military Lending Act; and
    (7) Violations of the Servicemembers Civil Relief Act.
    (b) Effect of evidence of discriminatory or other illegal credit
practices. In determining the effect of evidence of practices described
in paragraph (a) of this section on the bank's assigned rating, the
FDIC considers the nature, extent, and strength of the evidence of the
practices; the policies and procedures that the bank has in place to
prevent the practices; any corrective action that the bank has taken or
has committed to take, including voluntary corrective action resulting
from self-assessment; and any other relevant information.
Sec.  345.16  Strategic plan.
    (a) General. The FDIC assesses a bank's record of helping to meet
the credit needs of its assessment area(s) under a strategic plan if:
    (1) The bank has submitted the plan to the FDIC as provided for in
this section;
    (2) The FDIC has approved the plan;
    (3) The plan is in effect; and
    (4) The bank has been operating under an approved plan for at least
one year.
    (b) Plan submission--(1) Required submission. A bank must submit a
strategic plan that meets the requirements of this section if the bank:
    (i) Would otherwise be evaluated under Sec.  345.12 and does not
maintain retail domestic deposits on-balance sheet; or
    (ii) Is a small bank that does not originate retail loans.
    (2) Optional submission. A bank not covered under paragraph (b)(1)
of this section may submit a strategic plan to the FDIC for approval.
    (c) Data reporting. The FDIC's approval of a plan does not affect
the bank's data collection, recordkeeping, and reporting obligations,
if any, in Sec. Sec.  345.19, 345.20, 345.22, and 345.23 unless
otherwise determined in writing by the FDIC. The FDIC may require
additional bank-specific data collection, recordkeeping, and reporting
under a strategic plan, as appropriate.
    (d) Plans in general--(1) Term. A plan may have a term of no more
than five years, and any multi-year plan must include annual interim
measurable goals under which the FDIC evaluates the bank's performance.
    (2) Multiple assessment areas. A bank with more than one assessment
area may prepare a single plan for all of its assessment areas or
separate plans for one or more of its assessment areas.
    (e) Public participation in plan development. Before submitting a
plan to the FDIC for approval, a bank must:
    (1) Solicit public comment on the plan for at least 30 days by
submitting the plan for publication on the FDIC's website and by
publishing notice in at least one newspaper of general circulation in
each assessment area covered by the plan; and
    (2) During the public comment period, make copies of the plan
available for review by the public and provide copies of the plan upon
request for a reasonable fee to cover copying, printing, or mailing, if
applicable.
    (f) Submission of plan. The bank must submit its complete plan to
the FDIC at least six months prior to the proposed effective date of
the plan. The bank must also submit with its plan a description of any
written public comments received, including how the plan was revised in
light of the comments received. If the FDIC
[[Page 1262]]
determines the plan is not complete, the FDIC will notify bank
specifying the information needed, designating a reasonable period of
time for the bank to provide the information, and informing the bank
that failure to provide the information requested will result in no
further consideration being given to the plan.
    (g) Plan content--(1) Performance standards--(i) A plan must
specify measurable goals for helping to meet the credit needs of the
bank's communities at the bank level and in each of its assessment
areas, particularly the needs of low- and moderate-income census tracts
and low- and moderate-income individuals and families, through
qualifying activities.
    (ii) A plan must address the types and volume of qualifying
activities the bank will conduct. A plan may focus on one or more types
of qualifying activities considering the bank's capacity and
constraints, product offerings, and business strategy.
    (2) Assessment area delineation. A plan must include a delineation
of the bank's assessment area(s) that meets the requirements of Sec.
345.08(a)-(d). In addition, the plan may include assessment area
delineations that reflect its target geographic market as defined by
the bank in its strategic plan. For a de novo bank, the assessment area
delineations should include the projected location of its facilities,
retail domestic deposit base, and lending activities.
    (3) Confidential information. A bank may submit additional
information to the FDIC on a confidential basis, to the extent
permitted by law, but the goals stated in the plan must be sufficiently
specific to enable the public and the FDIC to judge the merits of the
plan.
    (4) Satisfactory and outstanding performance standards. A plan must
specify measurable goals that constitute satisfactory performance. A
plan may specify measurable goals that constitute outstanding
performance. If a bank submits, and the FDIC approves, both
satisfactory and outstanding performance goals, the FDIC considers the
bank eligible for an outstanding performance rating.
    (h) Plan approval--(1) Timing. The FDIC will act upon a plan within
6 months after the FDIC receives the complete plan and other material
required under paragraph (g) of this section. If the FDIC does not act
within this time period, the plan will be deemed approved unless the
FDIC extends the review period for good cause for no more than 90 days.
    (2) Public participation. In evaluating the plan's goals, the FDIC
considers any written public comment on the plan and any response by
the bank to any written public comment on the plan.
    (3) Criteria for evaluating a plan. The FDIC evaluates a plan's
goals by considering the extent and breadth of the qualifying
activities including:
    (i) Community development loans, community development investments,
and community development services; and
    (ii) The use of innovative, flexible, or complex qualifying
activities.
    (i) Plan amendment. During the term of a plan, a bank may request
the FDIC to approve an amendment to the plan on grounds that there has
been a material change in circumstances. The FDIC reserves the right to
require a bank that requests an amendment to a plan to comply with the
public participation process described in paragraph (e) of this
section.
Sec.  345.17  Assigned ratings.
    (a) General performance standards--(1) Bank-level assigned rating.
The FDIC determines the bank-level assigned rating for a bank evaluated
under Sec.  345.12 based on its bank-level presumptive rating under
Sec.  345.12, adjusted for performance context under Sec.  345.14, and
consideration of discriminatory or other illegal credit practices under
Sec.  345.15.
    (2) Assessment area assigned rating. The FDIC determines the
assessment area assigned ratings for a bank evaluated under Sec.
345.12 based on its assessment area presumptive rating under Sec.
345.12, adjusted for performance context under Sec.  345.14 and
consideration of discriminatory or other illegal credit practices under
Sec.  345.15.
    (b) Strategic plans assigned rating. A bank operating under a
strategic plan will receive, as applicable, assessment area assigned
ratings, a bank-level assigned rating, and state-level and multistate
metropolitan statistical area assigned ratings of satisfactory or
outstanding if it has met the measurable goals in the plan that
correspond to those ratings after considering performance context under
Sec.  345.14.
Sec.  345.18  State/multistate metropolitan statistical area assigned
rating.
    For a bank evaluated under Sec.  345.12 with interstate branches,
the FDIC will assign a rating for each state where the bank has a
facility-based assessment area and each multistate metropolitan
statistical area where the bank has a main office, branch, or non-
branch deposit-taking facility in two or more states in the multistate
metropolitan statistical area. The state or multistate metropolitan
statistical area assigned rating for that state or multistate
metropolitan statistical area is the lowest rating assigned to a
significant number of its assessment areas within that state or
multistate metropolitan statistical area.
Subpart E--Data Collection, Recordkeeping, and Reporting
Sec.  345.19  Data collection for banks evaluated under the general
performance standards in Sec.  345.12 or a strategic plan under Sec.
345.16.
    (a) General. Banks evaluated under the general performance
standards in Sec.  345.12 and banks evaluated under a strategic plan
under Sec.  345.16, unless otherwise determined in writing by the FDIC,
must collect and maintain the information required by this section.
    (b) Performance standards data. A bank must collect and maintain
the results of its
    (1) Retail lending distribution tests under Sec.  345.11 for the
borrower distribution and geographic distribution tests for each major
retail lending product line evaluated in the assessment area;
    (2) Bank-level and each assessment-area level CRA evaluation
measures calculated under Sec.  345.10; and
    (3) Presumptive ratings under Sec.  345.12.
    (c) Qualifying activities and retail domestic deposit data required
to be collected and maintained. A bank subject to this section must
collect and maintain the following data and supporting documentation
for all qualifying activities and certain non-qualifying activities
conducted by the bank until the completion of its next CRA evaluation:
    (1) Qualifying loan data. For each qualifying loan:
    (i) A unique number or alpha-numeric symbol to identify the
relevant loan file;
    (ii) Loan type;
    (iii) Date of
    (A) Origination for loans originated by the bank, if applicable;
    (B) Purchase for loans not originated by the bank, if applicable;
and
    (C) Sale if the loan is a retail loan and sold by the bank within
90 days of origination;
    (iv) An indicator of whether the loan was originated or purchased;
    (v) The loan amount at origination or purchase;
    (vi) The outstanding dollar amount of the loan, as of the close of
business on the last day of the month, for each month that the loan is
on-balance sheet;
    (vii) The loan location and the associated FIPS code for the MSA,
state, county or county equivalent, and census tract;
[[Page 1263]]
    (viii) The income or revenue of the borrower; and
    (ix) The criteria in Sec.  345.04 that the loan satisfies or that
it is on the illustrative list referenced in Sec.  345.05 and whether
it serves a particular assessment area, if applicable.
    (2) Other loan data. A bank must collect and maintain the following
data and supporting documentation for non-qualifying home mortgage
loans and consumer loans originations by the bank until the completion
of its next CRA evaluation:
    (i) A unique number or alpha-numeric symbol to identify the
relevant loan file;
    (ii) Loan type;
    (iii) The date of origination;
    (iv) The loan amount at origination;
    (v) The loan location and the associated FIPS code for the MSA,
state, county or county equivalent, and census tract; and
    (vi) The income of the borrower.
    (3) Number of home mortgage and consumer loans. For the home
mortgage product line and each consumer loan product line as defined in
Sec.  345.03, for each county or county equivalent:
    (i) The number of loans originated; and
    (ii) The number of loans originated to low- and moderate-income
borrowers.
    (4) Number of small loans to businesses. For the small loan to a
business product line, for each county or county equivalent:
    (i) The number of loans originated;
    (ii) The number of loans originated in low- and moderate-income
census tracts; and
    (iii) The number of loans originated to small businesses.
    (5) Number of small loans to farms. For the small loan to a farm
product line for each county or county equivalent:
    (i) The number of loans originated;
    (ii) The number of loans originated in low- and moderate-income
census tracts; and
    (iii) The number of loans originated to small farms.
    (6) Community development investment data. For each community
development investment:
    (i) A unique number, alpha-numeric symbol, or another mechanism to
identify the investment;
    (ii) Investment type;
    (iii) Date of investment by the bank;
    (iv) The outstanding dollar value of the investment, as of the
close of business on the last day of the month, for each month that the
investment is on-balance sheet;
    (v) The value of the monetary donation, as quantified in Sec.
345.06;
    (vi) The value of the in-kind donation, as quantified in Sec.
345.06;
    (vii) The investment location and the associated FIPS code for the
MSA, state, county or county equivalent, and census tract, if
applicable; and
    (viii) The criteria in Sec.  345.04 that the investment satisfies
or that it is on the illustrative list referenced in Sec.  345.05 and
whether it serves a particular assessment area, if applicable.
    (7) Community development services data. For each community
development service:
    (i) The dollar value of the services, as quantified in Sec.
345.06;
    (ii) A description of the qualifying activity;
    (iii) The date the service was performed;
    (iv) The service location and the associated FIPS code for the MSA,
state, county or county equivalent, and census tract, if applicable;
and
    (v) The qualifying activity criteria in Sec.  345.04 that the
service satisfies or that it is on the illustrative list referenced in
Sec.  345.05.
    (8) Retail domestic deposit data. The value of each retail domestic
deposit account and the physical address of each depositor as of the
close of business on the last day of each quarter during the
examination period.
    (c) Data collection certification. A bank must collect and maintain
a certification from each party conducting qualifying activities on
behalf of the bank that the information that the party provided to the
bank as described in paragraph (a) of this section is true and correct.
    (d) Assessment areas. A bank must collect and maintain until the
completion of its next CRA evaluation a list of its assessment area(s)
showing within the assessment area(s) each:
    (1) County or county equivalent;
    (2) Metropolitan division;
    (3) Nonmetropolitan area;
    (4) Metropolitan statistical area; or
    (5) State.
    (e) Bank facilities. A bank must collect and maintain until the
completion of its next CRA evaluation information indicating whether
each facility operated by the bank during the evaluation period was a
depository or non-depository facility.
Sec.  345.20  Retail domestic deposit data collection and recordkeeping
for small banks evaluated under the small bank performance standards in
Sec.  345.13.
    Retail domestic deposit data collection. Small banks must collect
and maintain data on the value of each retail domestic deposit account
and the physical address of each depositor as of the close of business
on the last day of each quarter during the examination period until the
completion of its next CRA evaluation.
Sec.  345.21  Activity location.
    (a) For the purpose of this part:
    (1) A consumer loan is located at the borrower's physical address
on file with the bank;
    (2) A home mortgage loan is located at the address of the property
to which the loan relates; and
    (3) A business or farm loan is located at the physical address of
the main business facility or farm or the physical address where the
loan proceeds will be applied, as indicated by the borrower; and
    (b) For the purpose of this part, the location of a community
development loan, a community development investment, or a community
development service is:
    (1) The address of a particular project to the extent a bank can
document that the services or funding it provided was allocated to that
particular project; or
    (2) Determined by allocating the activity across all of a bank's
assessment areas and other metropolitan statistical areas or non-
metropolitan statistical areas served by the activity according to the
share of the bank's deposits in those areas, treating the bank's
deposits in the region served by the activity as if they were all of
the bank's deposits, to the extent the bank cannot document that the
services or funding it provided was allocated to a particular project.
Sec.  345.22  Recordkeeping.
    Banks must keep the data collected under Sec.  345.19 and Sec.
345.20 in machine readable form (as prescribed by the FDIC) until the
completion of their next CRA evaluation.
Sec.  345.23  Reporting for banks evaluated under the general
performance standards in Sec.  345.12 or a strategic plan under Sec.
345.16.
    (a) General. Banks evaluated under the general performance
standards in Sec.  345.12 and banks evaluated under a strategic plan
under Sec.  345.16, unless otherwise determined in writing by the FDIC,
must report the information required by this section.
    (b) Performance standards data. On an annual basis, a bank subject
to this section must report to the FDIC the information required by
Sec.  345.19(b).
    (c) Qualifying activities data. On an annual basis, a bank subject
to this section must report to the FDIC the following data for all
qualifying activities conducted during the annual period:
    (1) The quantified value of qualifying retail loans;
    (2) The quantified value of community development loans;
[[Page 1264]]
    (3) The quantified value of community development investments; and
    (4) The quantified value of community development services.
    (d) Data collection certification. A bank subject to this section
must annually provide to the FDIC any certification required by Sec.
345.19(d).
    (e) Assessment area data. For each assessment area, a bank subject
to this section must annually report to the FDIC the information
required by Sec.  345.19(e).
    (f) Retail loans. A bank subject to this section must annually
report to the FDIC the information required by Sec.  345.19(c)(3)-(5)
for loans originated during the annual period.
    (g) Retail domestic deposit data. A bank subject to this section
must annually report its average quarterly retail domestic deposits as
of the close of business on the last day of each quarter.
    (h) Performance context information. A bank subject to this section
must report performance context information on the form required by
Sec.  345.14(c).
    (i) Form. Banks subject to this section must use the CRA data
reporting form available on the FDIC's website to meet the reporting
requirements in this section.
Sec.  345.24  Public disclosures.
    (a) Individual CRA Disclosure Statement. The FDIC prepares annually
a CRA Disclosure Statement for each bank evaluated under Sec.  345.12
that contains at the bank level:
    (1) The quantified value of qualifying retail loans;
    (2) The quantified value of community development loans;
    (3) The quantified value of community development investments; and
    (4) The quantified value of community development services.
    (b) Aggregate CRA Disclosure Statement. The FDIC prepares annually,
for each county, an aggregate CRA Disclosure Statement of home
mortgage, consumer, small loans to businesses, and small loans to farms
lending by all banks subject to reporting under this part. This
disclosure statement includes the following information, at the county
level, from all banks evaluated under Sec.  345.12, except that the
FDIC may adjust the form of the disclosure if necessary, because of
special circumstances, to protect the privacy of a borrower or bank:
    (1) The number of home mortgage loan originations;
    (2) The number of home mortgage loan originations to low- or
moderate-income individuals and families;
    (3) The number of originations for each consumer loan product line;
    (4) The number of originations to low- or moderate-income
individuals and families for each consumer loan product line;
    (5) The number of small loans to businesses;
    (6) The number of small loans to businesses in low- and moderate-
income census tracts;
    (7) The number of small loans to businesses provided to small
businesses;
    (8) The number of small loans to farms;
    (9) The number of small loans to farms in low- and moderate-income
census tracts; and
    (10) The number of small loans to farms provided to small farms;
    (c) Availability of CRA disclosure statements. The FDIC will
annually make publicly available the aggregate and individual CRA
Disclosure Statements, described in paragraphs (a) and (b) of this
section.
    (d) Availability of ratings. The FDIC will make available the
ratings of all FDIC-regulated banks and a list of all banks that
achieve an assigned rating of outstanding. A bank that achieves an
outstanding assigned rating will receive a certificate or seal of
achievement that may be displayed on its website and in its main office
and branches.
Sec.  345.25  Content and availability of public file.
    (a) Information available to the public. A bank must maintain a
public file that includes the following information:
    (1) All written comments received from the public for the current
year and each of the prior two calendar years that specifically relate
to assessment area needs and opportunities, and any response to the
comments by the bank, if neither the comments nor the responses contain
statements that reflect adversely on the good name or reputation of any
persons other than the bank or publication of which would violate
specific provisions of law;
    (2) A copy of the public section of the bank's most recent CRA
Performance Evaluation prepared by the FDIC. The bank must place this
copy in the public file within 30 business days after its receipt from
the FDIC;
    (3) A list of the bank's branches, their street addresses, and
census tracts;
    (4) A list of branches opened or closed by the bank during the
current year and each of the prior two calendar years, their street
addresses, and geographies;
    (5) A list of services (including hours of operation, available
loan and deposit products, and transaction fees) generally offered at
the bank's branches and descriptions of material differences in the
availability or cost of services at particular branches, if any. At its
option, a bank may include information regarding the availability of
alternative systems for delivering retail banking services (e.g., ATMs,
ATMs not owned or operated by or exclusively for the bank, banking by
telephone or computer, loan production offices, and bank-at-work or
bank-by-mail programs);
    (6) A map of each assessment area showing the boundaries of the
area and identifying the geographies contained within the area, either
on the map or in a separate list; and
    (7) Any other information the bank chooses.
    (b) Additional information available to the public--(1) Banks with
strategic plans. A bank that has been approved to be assessed under a
strategic plan must include in its public file a copy of that plan. A
bank need not include information submitted to the FDIC on a
confidential basis in conjunction with the plan.
    (2) Banks with less than satisfactory ratings. A bank that received
a less than satisfactory rating during its most recent examination must
include in its public file a description of its current efforts to
improve its performance in helping to meet the credit needs of its
entire community. The bank must update the description quarterly.
    (c) Availability of public information. A bank must make available
to the public the information required in this section.
    (d) Updating. Except as otherwise provided in this section, a bank
must ensure that the information required by this section is current as
of April 1 of each year.
Sec.  345.26  Availability of planned evaluation schedule.
    The FDIC will make available at least 30 days in advance of the
beginning of each calendar quarter a list of banks scheduled for CRA
evaluations in that quarter.
Sec.  345.27  Public notice by banks.
    A bank must make available to the public the notice set forth in
Appendix B of this part. Parenthetical text must be adjusted by each
bank as appropriate. Bracketed text must be included if applicable.
Appendix A to Part 345--Small Bank Ratings
    (a) Ratings in general--(1) In assigning a rating, the FDIC
evaluates a small bank's
[[Page 1265]]
performance under the applicable performance criteria in Sec.
345.13, adjusting for performance context in Sec.  345.14 and
consideration of any evidence of discriminatory and illegal credit
practices as described in Sec.  345.15. This includes consideration
of low-cost education loans provided to low-income borrowers and
activities in cooperation with minority- or women-owned financial
institutions and low-income credit unions.
    (2) A bank's performance need not fit each aspect of a
particular rating profile in order to receive that rating, and
exceptionally strong performance with respect to some aspects may
compensate for weak performance in others. The bank's overall
performance, however, must be consistent with safe and sound banking
practices and generally with the appropriate rating profile as
follows.
    (b) Banks evaluated under the small bank performance standards--
(1) Lending test ratings--(i) Eligibility for a satisfactory lending
test rating. The FDIC rates a small bank's lending performance
``satisfactory'' if, in general, the bank demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its assessment area(s), and taking into account, as
appropriate, other lending-related activities such as loan
originations for sale to the secondary markets and community
development loans and community development investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other
lending-related activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's assessment area(s);
    (D) A record of taking appropriate action, when warranted, in
response to written complaints, if any, about the bank's performance
in helping to meet the credit needs of its assessment area(s); and
    (E) A reasonable geographic distribution of loans given the
bank's assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A
small bank that meets each of the standards for a ``satisfactory''
rating under this paragraph and exceeds some or all of those
standards may warrant consideration for a lending test rating of
``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A
small bank may also receive a lending test rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standard for a
``satisfactory'' rating.
    (2) Bank-level rating--(i) Eligibility for an outstanding
overall rating. A small bank that meets each of the standards for a
``satisfactory'' rating under the lending test and exceeds some or
all of those standards may warrant consideration for a bank-level
rating of ``outstanding.'' In assessing whether a bank's performance
is ``outstanding,'' the FDIC considers the extent to which the bank
exceeds each of the performance standards for a ``satisfactory''
rating and its performance in making community development
investments and its performance in providing branches and other
services and delivery systems that enhance credit availability in
its assessment area(s).
    (ii) Needs to improve or substantial noncompliance overall
ratings. A small bank may also receive a rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standards for a
``satisfactory'' rating.
Appendix B to Part 345--Community Reinvestment Act Notice
    Under the Federal Community Reinvestment Act (CRA), the Federal
Deposit Insurance Corporation (FDIC) evaluates our record of helping
to meet the credit needs of this community, consistent with safe and
sound operations. The FDIC also takes this record into account when
deciding on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and
our performance under the CRA, including, for example, information
about our branches, such as their location and services provided at
them; the public section of our most recent CRA Performance
Evaluation, prepared by the FDIC; and comments received from the
public relating to assessment area needs and opportunities, as well
as our responses to those comments. You may review this information
today by reviewing the public section of our most recent CRA
evaluation, prepared by the FDIC, which is available at (web address
and/or physical address at which the public file can be reviewed and
copied).
    You may also have access to the following additional
information, which we will make available to you after you make a
request to us: (1) A map showing the assessment area containing a
select branch, which is the area in which the FDIC evaluates our CRA
performance for that particular community; (2) branch addresses and
associated branch facilities and hours in any assessment area; (3) a
list of services we provide at those locations; (4) our most recent
rating in the assessment area; and (5) copies of all written
comments received by us that specifically relate to the needs and
opportunities of a given assessment area, and any responses we have
made to those comments. If we are operating under an approved
strategic plan, you may also have access to a copy of the plan.
    At least 30 days before the beginning of each quarter, the FDIC
publishes a nationwide list of the (entity type) that are scheduled
for CRA examination in that quarter. This list is available from the
Regional Director, FDIC (address). You may send written comments
regarding the needs and opportunities of any of the (entity type)'s
assessment area(s) to (name, address, and email address of official
at bank) and the FDIC Regional Director (address and email address).
Your comments, together with any response by us, will be considered
by the FDIC in evaluating our CRA performance and may be made
public.
    You may ask to look at any comments received by the FDIC
Regional Director. You may also request from the FDIC Regional
Director an announcement of our applications covered by the CRA
filed with the FDIC. (We are an affiliate of (name of holding
company), a (entity type) holding company. You may request from the
(title of responsible official), Federal Reserve Bank of __
(address) an announcement of applications covered by the CRA filed
by (entity type) holding companies.)
    Dated: December 12, 2019.
Joseph M. Otting,
Comptroller of the Currency.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
    Dated at Washington, DC, on December 12, 2019.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2019-27940 Filed 1-8-20; 8:45 am]
 BILLING CODE 4810-33-P; 6714-01-P